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Page 1: ual Annual Report  2006

2006 Annual Report

Page 2: ual Annual Report  2006

$1,921M 2002

$(2,837)M 2002

$(1,360)M 2003

$(854)M 2004

$(219)M 2005

$447M 2006

$2,072M 2003

$2,943M 2004

Mainline Fuel Expense

Operating Earnings

$4,032M 2005

$4,824M 2006

To our Shareholders:

We are a very different company today than wewere in 2002 when we began our reorganization.The survival of our company was at stake; therestructuring tested our resolve.

A year ago we completed our $23 billion restructuring,during which we reduced our debt by some $13 billionand lowered our average annual costs by $7 billion, including consensual agreements with all our unions.

Our resolve, together with a firm belief in the future of United, was as critical as any asset on our balancesheet. Now, we turn that resolve to successfully competing in the U.S. and the international marketplace.We are focused on realizing the full potential of Unitedand building on the opportunity that we created for our customers, our employees and our investors.

Today, we are a new company with a muchstronger balance sheet and competitive assets, including United’s 80-year heritage, and we look to the future with confidence.

We are continuing to improve our performance acrossthe company. For the 11 months post exit, we reporteda net profit of $25 million and had three consecutivequarters of operating profit, despite fuel prices that wereabout $800 million higher than the previous year.

The fresh-start and exit-related items mask some of the cash-generation potential of the company, being burdened with about $500 million of non-cash, exit and fresh-start items. We ended the year with nearly $5 billion in cash and short-term investments. Subse-quently, we strengthened our balance sheet by payingdown $1 billion in debt and refinancing our exit facility,which will generate about $70 million in annual savings.Now that the majority of our employees have definedcontribution pension plans, our pension obligations will be “pay as you go.” We have limited near-term debtmaturities and capital spending requirements, all ofwhich means much of our operating cash flow adds toour cash balance.

We are well-positioned to confront what will continue to be a tough industry environment: increasing domesticand global competition; volatile fuel prices; and ongoingsecurity and infrastructure challenges, such as inade-quate airport capacity and Air Traffic Control.

Against a backdrop of escalatingfuel costs, UAL has improvedoperating earnings from a loss of $2.8 billion in 2002 to a $447 million profit in 2006, a $3.3 billion improvement.

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Mainline aircraft utilization, the actual time (in hours and minutes)an aircraft is flown each day, hasimproved 12% since 2002.

Focused on our Customers

Our customers want a consistent experience every timethey fly. That means delivering on the basics: reliability,cleanliness and courtesy, every time. High-value cus-tomers demand and value service above and beyondthe basics. They do not view air travel as a commodity.Increasing our share and loyalty of these premium customers represents significant revenue opportunity.

United is in the service industry, not merely transportation. We will succeed by focusing on our customers. Our segmentation strategy enablesus to better understand what customers expectand value in products and services.

For our international customers, we are rolling out ournew seat and entertainment products in United First® andUnited Business®, which we believe will be “best in class”among U.S. carriers and fully competitive worldwide. Weknow how important the onboard experience is to ourcustomers, and we are making significant investments in targeted products and service improvements. We areworking to materially improve every point of contact withour customers — from their first interaction with United,whether it’s our reservations center or united.com,through the airport, boarding, onboard service and baggage claim.

Responding to our customer’s feedback, we are addressing improvements to the airport lobby and gateareas, implementing fast tracking in the lobby and newsegmented boarding processes for our most frequentbusiness travelers that enable them to board first, or at their leisure.

By relentlessly pursuing our performance agenda— controlling costs, optimizing revenue and im-proving the customer experience — we are drivingnecessary improvements across the company.

Executing on our Performance Agenda

Our first responsibility is to ensure the safety and securityof our customers and employees. While we are proud ofour safety record over the years, we continue to refineand invest in our world-class safety programs and culture.

Safety is built on standard work. Just as safety is an integral part of United, establishing standard work practices across the company worldwide will drive im-provements in every aspect of our business. Eliminatingvariability enables us to deliver a consistent product, reduce costs and creates a baseline for further and continuous improvement.

Results are evident in initiatives such as resource optimization, implemented in all five of our U.S. hubs in2006. By employing standard work, we are able to turnplanes more quickly, and by year end we had added theequivalent of 9 mainline and 18 United Express® planes,without buying aircraft. Work initiated on the ramp atO’Hare, with our United Express partners at WashingtonDulles and with our Materials Management departmentin San Francisco, and much more will be shared and applied across the system.

We are supporting our performance agenda andour customer focus by investing in tools and train-ing for each one of our employees.

10:5211:09

2002

9:55

2005 2006

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Page 5: ual Annual Report  2006

In January of this year, we launched Business Educationtraining for all employees. The training focuses on understanding our business fundamentals and makingdecisions that balance the needs of our three stakehold-ers: customers, employees and investors. All leaders will take additional leadership training, and front-line employees who work directly with customers will attend service training.

We believe that providing better customer service and further reducing costs are not mutually exclusive.

We will measure our goals in service and product improvements as rigorously as we measure our progressagainst our cost goals. We achieved the $300 million in cost savings we outlined for 2006 and already haveput in place $135 million of the $400 million in savingsplanned for 2007. And, we are on track to achieve theremaining $265 million in savings in 2007.

We have no plans to add mainline aircraft until we exceed the goals of our business plan. We make disciplined decisions on allocation of our resources andour capital expenditures with the full participation ofcross-functional leaders, ensuring tight control of our$550 million capital expenditure plan for this year. Capitalexpenditures are at appropriate levels to fund criticalcustomer improvements, such as the international seatand entertainment improvements, and investments in information technology.

Improving our Margin

We apply that same discipline to generating revenue. In addition to being fiscally responsible in the structure of our fares, we are continuously looking for new revenue opportunities. We are offering products andservices that can command a revenue premium, such as Economy Plus®, which is on track to generate $100 million in upgrade revenue in 2007.

We are disciplined in our approach to capacity andmaintaining tight control over growth. Having led themarket in pulling down U.S. capacity, we continue toeliminate unprofitable routes and move to where opportunity exists, including international markets.

As we redeploy aircraft, we build the strength of ourglobal network. Today, we serve more destinations thanwe did prior to our restructuring. We are the largesttrans-Pacific passenger carrier, the first U.S. carrier toserve Kuwait, and the first to provide service to Vietnamin 30 years.

Where we fly starts with our customers. Our routechoices strengthen our five U.S. hubs, where wecan profitably provide better connections to globalmarkets and to smaller communities in the U.S.Our strong network is enhanced by our partners in the Star Alliance.®

After five years of working collaboratively with All NipponAirways and our Star partners, United and the other Star Alliance carriers moved into one terminal in the newSouth Wing of Tokyo’s Narita Airport Terminal 1, our Pacific hub. This state-of-the-art terminal provides customers with some of the fastest connection timesand innovative customer services. We are workingclosely with the British Airports Authority on a similarproject at London's Heathrow Airport. That move, whencomplete, will ensure that Star Alliance customers willhave use of a new terminal facility that offers world-classcustomer service standards.

With our Star partners, we can take our customers almost anywhere they want to fly. Connecting customersfrom smaller communities seamlessly, we are the onlycarrier that can take them from Peoria to Beijing, andthen onto 16 different points in China.

2.55M

2.70M

2002

1.98M

2005 2006

0

Employee productivity, as measured by available seat milesgenerated per full-time equivalentemployee, continued to increase,improving 36% since 2002.

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Page 6: ual Annual Report  2006

We assess our network by the value it brings to our customers and the best return to the company.We will continue to be rigorous and targeted in ourchoices, as in the recently awarded Washington,D.C., to Beijing route.

Our employees throughout the company and our busi-ness and community partners put together a compellingcase for this service, the first to connect the capitals ofthe U.S. and China. The new China service is customer-driven, providing collateral economic value to both countries. It also benefits our employees and will delivervalue to our investors.

By improving our network, our products and service,and by putting the frequent business customer first, we are winning back important, profitable corporate customers. Disciplined account management improvedthe performance of our corporate contract portfolio bymore than $70 million on an annual basis. In 2006, wesecured more than $200 million of business from newlyacquired corporate accounts, including more Fortune100 companies that now fly United. We are intent onbuilding their loyalty and our share of their business.

Our network and focus on our customers are just as vital to our cargo business. We are working closely withour partners to deliver the service our customers expect.Our freight traffic growth is outpacing the industry andfreight revenue is up, which is important as we only car-ried domestic U.S. mail for the first six months of 2006.During the year, we consolidated our airport operationsand cargo divisions, enabling us to tightly manage costsand ensure greater alignment on execution.

These same principles extend to our use of real estate.We are consolidating three leased suburban Chicago locations into our Operations Center in Elk Grove. Thismove enables us to reduce our costs and drive efficien-cies by bringing those who support the day-to-day operations together in one location. At the same time,we are moving about 350 management employees toUnited’s new headquarters in downtown Chicago.

Succeeding in a Global Environment

We have done a substantial amount of work to get where we are today, competing in the globalmarketplace.

United mainline takes our most frequent business travelers where they need to go, connecting with ourStar Alliance® and United Express® partners. In theU.S., we have added very successful products specifi-cally designed to meet customer needs in different mar-ket segments:

explus,SM our new 70-seat regional jet with First Class and Economy Plus, provides service to cities and smallercommunities across the U.S.

TedSM provides customers with a low-cost alternative toleisure destinations and all the benefits of Mileage Plus,®

Economy Plus and connecting service to hundreds of locations.

p.s.® provides customers with premium service fortranscontinental flights, competing in many instanceswith private jets.

We will continue to compete aggressively in thedomestic market and become a substantially better competitor with an improved product in our international markets.

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Page 7: ual Annual Report  2006

Our international competitors are merging across bor-ders, expanding, growing more profitable and investingin new fuel efficient and environmentally friendly aircraft.We have been very clear about the direction we think theindustry should take – we believe we need to finish thejob of deregulation and allow the aviation industry tofunction in the same type of economically deregulatedenvironment that benefits other global industries.

We believe competing globally on a level playing field isthe best way to secure a more stable and sustainable future that best meets the needs of our stakeholders.

We are focused on competing in the marketplace today,and positioning ourselves to take advantage of whateverchanges and opportunities are presented in the future.

Seizing Opportunities and Building our Futureeizing Opportunities and Building our Future

We intend to take full advantage of our strengths and our relentless resolve to win in a continually changing marketplace.

United is a company that can meet the toughestchallenges, and we are bullish about the opportunitywe have created. United’s fundamentals are solid. We have come a long way. We expect more of our-selves as we complete the work we have identifiedand continue to find further improvements.

I would like to thank our Board of Directors, employees, retirees, customers and business partners, including our labor union leaders, for their commitment to our success through this extraordinary journey.

We look forward to delivering on the promise that the future holds for our company, and for you, our investors.

Glenn F. TiltonChairman, President and CEO

52

B777

35

B767

30

B747

97

B757

97

A320

64

B737-300

117 Widebodies 343 Narrowbodies

55

A319

30

B737-500

With an average fleet age ofabout 12 years, United hasamong the industry’s youngestfleets and no near term plans topurchase aircraft.

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Board of Directors

Richard J. AlmeidaRetired Chairman and Chief Executive Officer of Heller

Financial, Inc. (1995–2001).

Mary K. BushPresident of Bush International, a global consulting firm

(1991–Present).

W. James FarrellRetired Chairman and Chief Executive Officer of Illinois Tool

Works, Inc., an engineering components manufacturer

(1995–2006).

Walter IsaacsonPresident and Chief Executive Officer of The Aspen Institute, an

international education and leadership institute (2003–Present);

Chairman and Chief Executive Officer of CNN (2001–2003).

Robert D. KrebsRetired Chairman of Burlington Northern Santa Fe Corporation

(2000–2002); Chairman and Chief Executive Officer of Burlington

Northern Santa Fe Corporation (1999–2000).

Robert S. MillerChairman of Delphi Corporation, a supplier of mobile electronics

and transportation systems (2005–Present); Non-Executive

Chairman of the Board, Federal Mogul Corporation, an auto

parts supplier (2004–2005); Chairman and Chief Executive

Officer, Bethlehem Steel Corporation (2001–2003).

James J. O’ConnorRetired Chairman and Chief Executive Officer of Unicom

Corporation, a holding company (1994–1998) and its wholly

owned subsidiary, Commonwealth Edison Company

(1980–1998).

Glenn F. TiltonChairman, President and Chief Executive Officer of UAL Corpo-

ration and its wholly owned subsidiary United Air Lines, Inc.

(2002–Present); Vice Chairman of ChevronTexaco Corporation

(2001–2002); Chairman of the Board and Chief Executive

Officer of Texaco Inc. (2001).

David J. VitaleChief Administrative Officer of the Chicago Public Schools

(2003–Present); private investor (2002–2003); President and

Chief Executive Officer of the Chicago Board of Trade

(2001–2002).

John H. WalkerFormer Chief Executive Officer and President of the Boler

Company, a transportation manufacturer (2003–2006); Chief

Executive Officer (2001–2003) and President and Chief

Operating Officer (2000–2001) of Weirton Steel Corporation.

ALPA and IAM Directors

Mark A. BathurstChairman of ALPA-MEC (Air Line Pilots Association) (2004–

Present); Captain, United Airbus 320 (1996–Present).

Stephen R. CanalePresident and Directing General Chairman of the IAM District

Lodge 141 (International Association of Machinists and

Aerospace Workers) (1999–Present).

UAL Corporation1200 E. Algonquin RoadElk Grove Township, IL 60007847-700-4000

Investor RelationsUAL CorporationWorld HeadquartersP.O. Box 66100Chicago, IL [email protected]/ir

Information relating to transfer requirements, lost certificates and other related matters may be obtained from the transfer agent:

Computershare250 Royall StreetCanton, MA 02021(800) 919-7931(312) 588-4267computershare.com/contactus

This annual report contains certain forward-looking statements. Please see “Item 7. Management’s Discussionand Analysis of Financial Condition and Results of Operations. – ForwardLooking Information” in the Form 10-Kfor additional information relating to the use of forward-looking statements.

UAL_AR_FinalRev2_Mar8.qxd 3/8/07 1:59 PM Page 8

Page 9: ual Annual Report  2006

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K## ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2006

OR

"" TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-06033

UAL CORPORATION(Exact name of registrant as specified in its charter)

Delaware 36-2675207(State or other jurisdiction of (IRS Employer

incorporation or organization) Identification No.)

Location: 1200 East Algonquin Road, Elk Grove Township,Illinois 60007

Mailing Address: P. O. Box 66919, Chicago, Illinois 60666(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (847) 700-4000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange on Which RegisteredCommon Stock, $.01 par value NASDAQ Global Select Market

Securities registered pursuant to Section 12 (g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct. Yes " No #

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of theAct. Yes " No #

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was requiredto file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes # No "

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment to this Form 10-K. "

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer.See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer # Accelerated filer " Non-accelerated filer "

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes " No #

The aggregate market value of voting stock held by non-affiliates of the Registrant was $3,099,707,715 as of June 30,2006.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by acourt. Yes # No "

The number of shares of common stock outstanding as of February 28, 2007 was 112,741,372.

DOCUMENTS INCORPORATED BY REFERENCE

Information required by Items 10, 11, 12, 13 and 14 of Part III of this Form 10-K are incorporated by reference from theCompany’s definitive proxy statement for its 2007 Annual Meeting of Stockholders to be held on May 10, 2007.

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2

UAL Corporation and Subsidiary Companies Report on Form 10-KFor the Year Ended December 31, 2006

Page

PART IItem 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

PART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Item 7. Management’s Discussion and Analysis of Financial Condition and Results of

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . 58Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60Item 9. Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119Item 9B. Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

PART IIIItem 10. Directors, Executive Officers and Corporate Governance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 124Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124Item 12. Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124Item 13. Certain Relationships, Related Transactions and Director Independence. . . . . . . . . . . . . . 124Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

PART IVItem 15. Exhibits, Financial Statements and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125

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PART I

ITEM 1. BUSINESS.

UAL Corporation (together with its consolidated subsidiaries, “we,” “our,” “us,” “UAL” or the“Company”) was incorporated under the laws of the State of Delaware on December 30, 1968. Worldheadquarters is located at 1200 East Algonquin Road, Elk Grove Township, Illinois 60007. The mailingaddress is P.O. Box 66919, Chicago, Illinois 60666 (telephone number (847) 700-4000).

UAL is a holding company whose principal subsidiary is United Air Lines, Inc. (“United”). United’soperations, which consist primarily of the transportation of persons, property, and mail throughout theU.S. and abroad, accounted for most of UAL’s revenues and expenses in 2006. United provides theseservices through full-sized jet aircraft (which the Company refers to as its “mainline” operations), as wellas smaller aircraft in its regional operations conducted under contract by “United Express®” carriers.

United is one of the largest passenger airlines in the world with more than 3,600 flights a day to morethan 200 destinations through its mainline and United Express services. United offers approximately 1,550average daily mainline (including Ted(SM)) departures to more than 120 destinations in 30 countries andtwo U.S. territories, including the Washington Dulles-Rome service commencing in the first half of 2007.In addition, United will commence its Washington Dulles-Beijing service on March 28, 2007 havingreceived final U. S. Department of Transportation (“DOT”) approval for this route in February 2007.United provides regional service, connecting primarily via United’s domestic hubs, through marketingrelationships with United Express carriers, which provide more than 2,050 average daily departures toapproximately 160 destinations. United serves virtually every major market around the world, eitherdirectly or through its participation in the Star Alliance®, the world’s largest airline network.

United offers services that the Company believes will allow it to generate a revenue premium bymeeting distinct customer needs. This strategy of market segmentation is intended to optimize margins andcosts by offering the right service to the right customer at the right time. These services include:

• United mainline, including United First®, United Business® and Economy Plus®, the last providingthree to five inches of extra legroom on all United mainline flights (including Ted), and onexplus(SM) regional jet flights;

• Ted, a low-fare service, now operates 56 aircraft and serves 20 airports with over 230 dailydepartures from all United hubs;

• p.s. (SM)—a premium transcontinental service connecting New York with Los Angeles and SanFrancisco; and

• United Express, with a total fleet of 290 aircraft operated by regional partners, including over 10070-seat aircraft that offer explus, United’s premium regional service, redefining the regional jetexperience.

The Company also generates significant revenue through its Mileage Plus® Frequent Flyer Program(“Mileage Plus”), United Cargo(SM) and United Services. Mileage Plus contributed approximately$600 million to passenger and other revenue in 2006 and helps the Company attract and retain high-valuecustomers. United Cargo generated $750 million in freight and mail revenue in 2006. United Servicesgenerated approximately $280 million in revenue in 2006 by utilizing downtime of otherwise under-utilizedresources.

The Company believes its restructuring has made United competitive with network airline peers. Inevery year of the restructuring, beginning in 2003, the Company has improved its financial performance.The Company’s 2006 financial results clearly demonstrate this progress despite an increase in the price ofmainline fuel of over 160% since 2002. Since emerging from bankruptcy on February 1, 2006, the Company

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4

generated operating income of $499 million for the eleven months ended December 31, 2006. Mainlinefuel expense in this period was $4.5 billion. These amounts compare to an operating loss of $2.8 billion andmainline fuel expense of $1.9 billion in 2002, the year the Company filed for bankruptcy as discussedbelow.

Management’s goal is to further improve profit margins through continuous improvements to its corebusiness across its operations by focusing on superior customer service, controlling unit costs andimproving unit revenues by offering differentiated products and services and realizing revenue premiums.Having completed its reorganization and prepared a solid platform for growth, the Company is nowbuilding on its core competitive advantages, including strong brand recognition, its leading loyalty programand broad global airline network.

The Company’s web address is www.united.com. The information contained on or connected to theCompany’s web address is not incorporated by reference into this Annual Report on Form 10-K andshould not be considered part of this or any other report filed with the U.S. Securities and ExchangeCommission (“SEC”). Through this website, the Company’s filings with the SEC, including annual reportson Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to thosereports, are accessible without charge as soon as reasonably practicable after such material is electronicallyfiled with or furnished to the SEC.

This Form 10-K contains various “forward-looking statements” within the meaning of Section 27A of theSecurities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.Forward-looking statements represent the Company’s expectations and beliefs concerning future events, basedon information available to the Company on the date of the filing of this Form 10-K, and are subject to variousrisks and uncertainties. Factors that could cause actual results to differ materially from those referenced in theforward-looking statements are listed in Item 1A. Risk Factors. The Company disclaims any intent or obligationto update or revise any of the forward-looking statements, whether in response to new information, unforeseenevents, changed circumstances or otherwise.

Bankruptcy Considerations

The following discussion provides general background information regarding the Company’s Chapter11 cases, and is not intended to be an exhaustive summary. Detailed information pertaining to itsbankruptcy filings may be obtained at www.pd-ual.com. See also Note 1, “Voluntary Reorganization UnderChapter 11,” in the Notes to Consolidated Financial Statements.

On December 9, 2002 (the “Petition Date”), UAL, United, and 26 direct and indirect wholly-ownedsubsidiaries (collectively, the “Debtors”) filed voluntary petitions to reorganize their businesses underChapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the NorthernDistrict of Illinois, Eastern Division (the “Bankruptcy Court”). On January 20, 2006, the Bankruptcy Courtconfirmed the Debtors’ Second Amended Joint Plan of Reorganization Pursuant to Chapter 11 of theUnited States Bankruptcy Code (the “Plan of Reorganization”). The Plan of Reorganization becameeffective and the Debtors emerged from bankruptcy protection on February 1, 2006 (the “Effective Date”).On the Effective Date, UAL implemented fresh-start reporting in accordance with American Institute ofCertified Public Accountants’ Statement of Position 90-7 “Financial Reporting by Entities in Reorganizationunder the Bankruptcy Code” (“SOP 90-7”).

The Plan of Reorganization generally provides for the full payment or reinstatement of allowedadministrative claims, priority claims, and secured claims, and the distribution of new equity and debtsecurities to the Debtors’ creditors and employees in satisfaction of allowed unsecured and deemed claims.The Plan of Reorganization contemplates UAL issuing up to 125 million shares of common stock (out ofthe one billion shares of new common stock authorized under its certificate of incorporation). The newcommon stock was listed on the NASDAQ National Market and began trading under the symbol “UAUA”

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on February 2, 2006. Ultimately, distributions of common stock, subject to certain holdbacks as describedin the Plan of Reorganization, will be as follows:

• Approximately 115 million shares of common stock to unsecured creditors and employees;

• Up to 9.825 million shares of common stock (or options or other rights to acquire shares) under theManagement Equity Incentive Plan (“MEIP”) approved by the Bankruptcy Court; and

• Up to 175,000 shares of common stock (or options or other rights to acquire shares) under theDirector Equity Incentive Plan (“DEIP”) approved by the Bankruptcy Court.

The Plan of Reorganization also provides for the issuance of the following securities:

• 5 million shares of 2% mandatorily convertible preferred stock issued to the Pension BenefitGuaranty Corporation (“PBGC”) shortly after the Effective Date;

• Approximately $150 million in aggregate principal amount of 5% senior convertible notes issued toholders of certain municipal bonds shortly after the Effective Date;

• $726 million in aggregate principal amount of 4.5% senior limited-subordination convertible notesissued in July 2006 to certain irrevocable trusts established for the benefit of certain employees (the“Limited-Subordination Notes”);

• $500 million in aggregate principal amount of 6% senior notes issued to the PBGC shortly after theEffective Date; and

• $500 million in aggregate principal amount of 8% senior contingent notes (in up to eight equaltranches of $62.5 million) issuable to the PBGC upon the satisfaction of certain contingencies.

Pursuant to the Company’s Plan of Reorganization, the Limited-Subordination Notes were requiredto be issued within 180 days of the Effective Date with a conversion price equal to 125% of the averageclosing price for the 60 consecutive trading days following February 1, 2006, and an interest rateestablished so the notes would trade at par upon issuance. In July 2006, the Company reached agreementwith five of the seven eligible employee groups to modify the conversion price to instead be based upon thevolume-weighted average price of the common stock over the two trading days ending on July 25, 2006.This modification resulted in a new conversion price of $34.84, rather than of $46.86, which was theconversion price under the initial terms of the notes. Because the reduction in the conversion priceresulted in a benefit to noteholders, the Company was able to issue the notes at an interest rate of 4.5%,which is a lower rate of interest than would have been required under the initial terms in order for thenotes to trade at par upon issuance. The Company reached agreement with the two other employee groupsto pay them cash totaling approximately $0.4 million rather than issuing additional notes of similarvalue. See Note 11, “Debt Obligations,” in the Notes to Consolidated Financial Statements for furtherinformation.

Pursuant to the Plan of Reorganization, UAL common stock, preferred stock, and Trust OriginatedPreferred Securities issued before the Petition Date were canceled on the Effective Date, and nodistribution was made to holders of those securities.

On the Effective Date, the Company secured access to $3.0 billion in secured exit financing (the“Credit Facility”) which consisted of a $2.45 billion term loan, a $350 million delayed draw term loan and a$200 million revolving credit line. On the Effective Date, the $2.45 billion term loan and the entirerevolving credit line, consisting of $161 million in cash and $39 million of letters of credit, were drawn andused to repay the Debtor-In-Possession credit facility (the “DIP Financing”) and to make other paymentsrequired upon exit from bankruptcy, as well as to provide ongoing liquidity to conduct post-reorganizationoperations. Subsequently, during the first quarter of 2006, the Company repaid the entire outstandingbalance on the revolving credit line and accessed the $350 million delayed draw term loan. In

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February 2007, the Company prepaid $972 million of its Credit Facility debt and amended certain terms ofthe Credit Facility. For further details on the Credit Facility including the prepayment and related facilityamendment (the “Amended Credit Facility”), see Note 11, “Debt Obligations,” in the Notes toConsolidated Financial Statements.

Significant Matters Remaining to be Resolved in Bankruptcy Court. During the course of its Chapter 11proceedings, the Company successfully reached settlements with most of its creditors and resolved mostpending claims against the Debtors. However, certain significant matters remain to be resolved in theBankruptcy Court. For details, see Note 1, “Voluntary Reorganization Under Chapter 11—BankruptcyConsiderations,” in the Notes to Consolidated Financial Statements.

Operations

Segments. UAL operates its businesses through two reporting segments: mainline and UnitedExpress. In 2006, in light of the Company’s bankruptcy-related restructuring and organizational changes,management reevaluated the Company’s segment reporting. As a result, the Company determined that thegeographic regions and UAL Loyalty Services, LLC (“ULS”), which it previously reported as segments,were no longer segments requiring disclosure under Statement of Financial Accounting Standards No. 131,“Disclosures about Segments of an Enterprise and Related Information” (“SFAS 131”). UAL now manages itsbusiness as an integrated network with assets deployed across integrated mainline and regional carriernetworks, whereas in the past United focused its business management decisions within specific geographicregions and services. This new focus on managing the business seeks to maximize the profitability of theoverall airline network. The operations of ULS are included in mainline operations. See “UAL LoyaltyServices, LLC,” below for further information on its business activities. Financial information on UAL’sreportable segments, including restated segment information for 2005 and 2004, can be found in Note 9,“Segment Information,” in the Notes to Consolidated Financial Statements.

Mainline. Mainline operating revenues were $16.4 billion in 2006, $15.0 billion in 2005 and$14.5 billion in 2004. As of December 31, 2006, mainline domestic operations served 85 destinationsprimarily throughout the U.S. and Canada and operated hubs in Chicago, Denver, Los Angeles, SanFrancisco and Washington, D.C. Mainline international operations serve the Pacific, Atlantic, and LatinAmerica regions. The Pacific region includes nonstop service to Beijing, Hong Kong, Nagoya, Osaka,Seoul, Shanghai, Sydney and Tokyo (with service to Taipei scheduled to commence in June 2007); directservice to Bangkok, Seoul, Singapore and Taipei via its Tokyo hub; direct service to Ho Chi Minh City andSingapore via Hong Kong, and to Melbourne via Sydney. The Atlantic region includes nonstop service toAmsterdam, Brussels, Frankfurt, London, Munich, Paris and Zurich, with service to Rome scheduled tocommence in April 2007. In 2006, United commenced service from Washington Dulles to Kuwait City aspart of the Atlantic region. United also provides seasonal service to Bermuda. The Latin American regionoffers nonstop service to Buenos Aires and Sao Paulo and direct service to Montevideo (via Buenos Aires)and Rio de Janeiro (via Sao Paulo). The Latin American region also serves various Mexico destinationsincluding Cancun, Mexico City, Puerto Vallarta, San Jose del Cabo, and Ixtapa/Zihuatanejo (seasonal);various Caribbean points including Aruba and seasonal service to Montego Bay, Nassau, Punta Cana, andSt. Maarten; and Central America including Guatemala City, San Salvador and Liberia, Costa Rica(seasonal).

Operating revenues attributed to mainline domestic operations were $10.0 billion in 2006, $9.0 billionin 2005 and $9.1 billion in 2004. Operating revenues attributed to mainline international operations were$6.4 billion in 2006, $6.0 billion in 2005 and $5.3 billion in 2004. For purposes of the Company’s geographicrevenue reporting, the Company considers destinations in Mexico to be part of the Latin America regionas opposed to the North America region. See Note 9, “Segment Information,” in the Notes to ConsolidatedFinancial Statements for financial information on the mainline and United Express segments and operatingrevenues by geographic regions as reported to the DOT.

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As of December 31, 2006, the mainline segment operated 460 aircraft and produced approximately143 billion available seat miles (“ASMs”) and 117 billion revenue passenger miles (“RPMs”) during 2006.

United Express. United Express operating revenues were $2.9 billion in 2006, $2.4 billion in 2005 and$1.9 billion in 2004. United has contractual relationships with various regional carriers to provide regionaljet and turboprop service branded as United Express. United Express is an extension of the Unitedmainline network (United, Ted and p.s.). SkyWest Airlines, Mesa Airlines, Colgan Airlines, ChautauquaAirlines, Shuttle America, Trans States Airlines and GoJet Airlines are all United Express carriers, most ofwhich operate under capacity purchase agreements. Under these agreements, United pays the regionalcarriers contractually-agreed fees (carrier-controlled costs) for operating these flights plus a variablereimbursement (incentive payment) based on agreed performance metrics. The carrier-controlled costs arebased on specific rates for various operating expenses of the United Express carriers, such as crewexpenses, maintenance and aircraft ownership, some of which are multiplied by specific operating statistics(e.g., block hours, departures) while others are fixed monthly amounts. The incentive payment is a markupapplied to the carrier-controlled costs for superior operational performance. Under these capacityagreements, United is responsible for all fuel costs incurred as well as landing fees, facilities rent and de-icing costs, which are passed through without any markup. In return, the regional carriers operate thiscapacity on schedules determined by United, which also determines pricing, revenues and inventory levelsand assumes the inventory and distribution risk for the available seats.

The capacity agreements which United has entered into with United Express carriers do not includethe provision of ground handling services. As a result, United Express sources ground handling supportfrom a variety of third-party providers as well as by utilizing internal United resources in some cases.

While the regional carriers operating under capacity purchase agreements comprise over 95% ofUnited Express flying, the Company also has limited prorate agreements with SkyWest Airlines andColgan Airlines. Under these prorate agreements, United and its prorate partners agree to divide revenuecollected from each passenger according to a formula, while both United and the prorate partners areindividually responsible for their own costs of operations. United also collects a program fee from ColganAirlines to cover certain marketing and distribution costs such as credit card transaction fees, globaldistribution systems (“GDS”) transaction fees, and frequent flyer costs. Unlike capacity purchaseagreements, these prorate agreements require the regional carrier to retain the control and risk ofscheduling, market selection, seat pricing and inventory for its flights.

As of December 31, 2006, United Express carriers operated 290 aircraft and produced approximately16 billion ASMs and 12 billion RPMs during 2006.

Ted. In February of 2004, United launched Ted in Denver to provide a tailored single-class service,including Economy Plus seating, to better serve leisure destinations in the United network. Currently 56A320 aircraft are configured for Ted service. Ted provides service from United’s hubs in Denver,Washington Dulles, Chicago O’Hare International Airport (“O’Hare”), Los Angeles and San Francisco todestinations in Arizona, California, Florida, Louisiana, Nevada, Mexico and the Caribbean. As ofDecember 31, 2006, Ted provided service from all of United’s hubs to 11 destinations in the U.S., includingits territories, and four in Mexico.

United Cargo. United Cargo offers both domestic and international shipping through a variety ofservices including United Small Package Delivery, EXP (“Express”), and GEN (“General”) cargo services.Freight shipments comprise approximately 85% of United Cargo’s volumes, with mail comprising theremainder. During 2006, United Cargo accounted for approximately 4% of UAL’s operating revenues bygenerating $750 million in freight and mail revenue, a 3% increase versus 2005.

United Services. United Services is a global airline support business offering customerscomprehensive solutions for their aircraft maintenance, repair and overhaul (“MRO”), aircraft ground

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handling and flight crew training. United Services brings nearly 80 years of experience to serveapproximately 140 airline customers worldwide. MRO services account for approximately 75% of UnitedServices’ revenue with ground handling and flight crew training accounting for the remainder. MROrevenue sources include engine maintenance, maintenance of high-tech components, line maintenance andlanding gear maintenance. During 2006, United Services generated approximately $280 million in revenue,a 12% increase as compared to 2005.

Fuel. In 2006, fuel was the Company’s largest operating expense. The Company’s annual mainlineand United Express fuel costs and consumption were as follows:

2006 2005

MainlineUnited

Express MainlineUnitedExpress

Gallons consumed (in millions). . . . . . . . . . . . . . . . . . . 2,290 373 2,250 353Average price per gallon, including tax and hedge

impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.11 $2.23 $ 1.79 $2.01Cost (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,824 $ 834 $4,032 $ 709

United Express fuel expense is classified as Regional affiliates expense in the Statements of

Consolidated Operations.

The price and availability of jet fuel significantly affect the Company’s results of operations. Asignificant rise in jet fuel prices was the primary reason that the Company’s fuel expense increased in eachof the last two years. The Company expects to be able to offset some, but not all, of any future fuel expenseincreases through higher revenues and the use of fuel hedge contracts.

To ensure adequate supplies of fuel and to provide a measure of control over fuel costs, the Companyarranges to have fuel shipped on major pipelines and stored close to its major hub locations. Although theCompany currently does not anticipate a significant reduction in the availability of jet fuel, a number offactors make predicting fuel prices and fuel availability uncertain, including changes in world energydemand, geopolitical uncertainties affecting energy supplies from oil-producing nations, industrialaccidents, threats of terrorism directed at oil supply infrastructure, extreme weather conditions causingtemporary shutdowns of production and refining capacity, and changes in relative demand for otherpetroleum products that may impact the quantity and price of jet fuel produced from period to period.

Alliances. United has entered into a number of bilateral and multilateral alliances with other airlines,expanding travel choices for our customers through these relationships by participating in marketsworldwide that United does not serve directly. These marketing alliances typically include one or more ofthe following features: joint frequent flyer program participation; code sharing of flight operations(whereby selected seats on one carrier’s flights can be marketed under the brand name of another carrier);coordination of reservations, ticketing, passenger check-in, baggage handling and flight schedules; andother resource-sharing activities.

The most significant of these arrangements is the Star Alliance, a global integrated airline network co-founded by United in 1997. As of February 1, 2007, Star Alliance carriers serve over 800 destinations inover 150 countries with over 14,000 average daily flights. Current Star Alliance partners, in addition toUnited, are Air Canada, Air New Zealand, All Nippon Airways, Asiana, the Austrian Airlines Group, bmi,LOT Polish Airlines, Lufthansa, SAS, Singapore Airways, South African Airways, Spanair, Swiss, TAPPortugal, Thai International Airways and US Airways.

In 2006, Star Alliance accepted the applications of Air China, Shanghai Airlines and Turkish Airlinesto join the alliance. These airlines are in the process of completing their Star Alliance joiningrequirements.

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United also has independent marketing agreements with other air carriers, not currently members ofthe Star Alliance, including Air China, Aloha, Gulfstream International, Great Lakes Airlines, TACAGroup, Island Air, Shanghai Airlines and Virgin Blue.

Mileage Plus. Mileage Plus builds customer loyalty by offering awards and services to frequenttravelers. Mileage Plus members can earn mileage credit for flights on United, United Express, Ted,members of the Star Alliance, and certain other airlines that participate in the program. Miles also can beearned by purchasing the goods and services of our non-airline partners, such as hotels, car rentalcompanies, and credit card issuers. Mileage credits can be redeemed for free, discounted or upgradedtravel and non-travel awards. There are nearly 50 million members enrolled in Mileage Plus. For a detaileddescription of the accounting treatment of Mileage Plus program activity, which was changed to a deferredrevenue model upon the adoption of fresh-start reporting on the Effective Date, see “Critical AccountingPolicies” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

UAL Loyalty Services, LLC. ULS focuses on expanding the non-core marketing businesses of Unitedand building airline customer loyalty. ULS operates substantially all United-branded travel distributionand customer loyalty e-commerce activities, such as united.com. In addition, ULS owns and operatesMileage Plus, being responsible for member relationships, communications and account management;while United is responsible for other aspects of Mileage Plus, including elite membership programs such asGlobal Services, Premier, Premier Executive and Premier Executive 1K, and the establishment of awardmileage redemption programs and airline-related customer loyalty recognition policies. United is alsoresponsible for managing relationships with its Mileage Plus airline partners, while ULS managesrelationships with non-airline business partners, such as the Mileage Plus Visa Card, hotels, car rentalcompanies and dining programs, among others.

Distribution Channels. The majority of United’s airline seat inventory continues to be distributedthrough the traditional channels of travel agencies and GDS, such as Sabre and Galileo. The growing useof alternative distribution systems, including the Company’s website and GDS new entrants, however,provides United with an opportunity to lower its ticket distribution costs. To encourage customer use oflower-cost channels and capitalize on these cost-saving opportunities, the Company will continue toexpand the capabilities of its website, www.united.com, and it guarantees the availability of the lowestprices on united.com.

Industry Conditions

Seasonality. The air travel business is subject to seasonal fluctuations. The Company’s operations canbe adversely impacted by severe weather and the first and fourth quarter results of operations normallyreflect lower travel demand. Historically, results of operations are better in the second and third quarterswhich reflect higher levels of travel demand.

Domestic Competition. The domestic airline industry is highly competitive and dynamic. In domesticmarkets, new and existing carriers are generally free to initiate service between any two points within theU.S. United’s competitors consist primarily of other airlines, a number of whom are low-cost carriers(“LCC(s)”) with lower-cost structures than United’s, and, to a lesser extent, other forms of transportation.

About 82% of United’s domestic revenue is now exposed to LCC competition. In 2006 and early 2007,Southwest Airlines, JetBlue Airways and other LCCs have initiated new service or expanded their servicefrom certain of United’s hub cities. United has experience competing directly with LCCs in its markets andbelieves it is well positioned to compete effectively.

Domestic pricing decisions are largely affected by the need to meet competition from other U.S.airlines. Fare discounting by competitors has historically had a negative effect on the Company’s financialresults because United often finds it necessary to match competitors’ fares to maintain passenger traffic.

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Attempts by United and other network airlines to raise fares often fail due to lack of competitive matchingby LCCs; however, because of the pressure of higher fuel prices and other industry conditions, some fareincreases have occurred. Because of different cost structures, low ticket prices that generate a profit for aLCC have usually had a negative effect on the Company’s financial results.

International Competition. In United’s international networks, the Company competes not only withU.S. airlines, but also with foreign carriers. Competition on specified international routes is subject tovarying degrees of governmental regulations. See “Industry Regulation,” below. As the U.S. is the largestmarket for air travel worldwide, United’s ability to generate U.S. originating traffic from its integrateddomestic route systems provides United with an advantage over non-U.S. carriers. Foreign carriers areprohibited by U.S. law from carrying local passengers between two points in the U.S. and Unitedexperiences comparable restrictions in foreign countries. In addition, U.S. carriers are often constrainedfrom carrying passengers to points beyond designated international gateway cities due to limitations in airservice agreements or restrictions imposed unilaterally by foreign governments. To compensate for thesestructural limitations, U.S. and foreign carriers have entered into alliances and marketing arrangementsthat allow these carriers to feed traffic to each other’s flights (see “Alliances,” above, for further details).

Insurance. United carries hull and liability insurance of a type customary in the air transportationindustry, in amounts that the Company deems appropriate, covering passenger liability, public liability anddamage to United’s aircraft and other physical property. United also maintains other types of insurancesuch as property, directors and officers, cargo, automobile and the like, with limits and deductibles that arestandard within the industry. Since the September 11, 2001 terrorist attacks, the Company’s insurancepremiums have increased significantly. Additionally, after September 11, 2001, commercial insurerscanceled United’s liability insurance for losses resulting from war and associated perils (terrorism,sabotage, hijacking and other similar events). The U.S. government subsequently agreed to providecommercial war-risk insurance for U.S. based airlines until August 31, 2007 covering losses to employees,passengers, third parties and aircraft. The Secretary of Transportation may extend this coverage untilDecember 31, 2007. If the U.S. government does not extend this coverage beyond August 31, 2007,obtaining comparable coverage from commercial underwriters could result in substantially higherpremiums and more restrictive terms, if it is available at all. See “Increases in insurance costs or reductionsin insurance coverage may adversely impact the Company’s operations and financial results” in Item 1A.Risk Factors, below.

Industry Regulation

Domestic Regulation.

General. All carriers engaged in air transportation in the United States are subject to regulation bythe DOT. Among its responsibilities, the DOT issues certificates of public convenience and necessity fordomestic air transportation (no air carrier, unless exempted, may provide air transportation without aDOT certificate of public convenience and necessity), grants international route authorities, approvesinternational code share agreements, regulates methods of competition and enforces certain consumerprotection regulations, such as those dealing with advertising, denied boarding compensation and baggageliability.

Airlines also are regulated by the Federal Aviation Administration (“FAA”), a division of the DOT,primarily in the areas of flight operations, maintenance and other safety and technical matters. The FAAhas authority to issue air carrier operating certificates and aircraft airworthiness certificates, prescribemaintenance procedures, and regulate pilot and other employee training, among other responsibilities.From time to time, the FAA issues rules that require air carriers to take certain actions, such as theinspection or modification of aircraft and other equipment, that may cause the Company to incursubstantial, unplanned expenses. The airline industry is also subject to various other federal, state and local

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laws and regulations. The U.S. Department of Homeland Security (“DHS”) has jurisdiction over virtuallyall aspects of civil aviation security. See “Legislation,” below. The U.S. Department of Justice hasjurisdiction over certain airline competition matters. The U.S. Postal Service has authority over certainaspects of the transportation of mail. Labor relations in the airline industry are generally governed by theRailway Labor Act (“RLA”). The Company is also subject to inquiries by the DOT, FAA and other U.S.and international regulatory bodies.

Airport Access. Access to landing and take-off rights, or “slots,” at several major U.S. airports andmany foreign airports served by United are, or recently have been, subject to government regulation. TheFAA designated John F. Kennedy International Airport (“JFK”) in New York, LaGuardia Airport(“LaGuardia”) in New York and Ronald Reagan Washington National Airport in Washington, D.C. as“high density traffic airports” and has limited the number of departure and arrival slots at those airports.Slot restrictions at O’Hare were eliminated in July 2002 and were eliminated at JFK and LaGuardia inJanuary 2007. From time to time, the elimination of slot restrictions has impacted United’s operationalperformance and reliability.

Notwithstanding the formal elimination of slot restrictions at O’Hare in July 2002, the FAA imposedtemporary restrictions on flight operations there beginning in 2004 to address air traffic congestionconcerns. In August 2006, the FAA issued a longer-term rule restricting flight operations at O’Hare, whichremains in effect until 2008.

At LaGuardia, the FAA has proposed an interim rule that would impose caps and restrictions onflight operations similar to those in effect at O’Hare. The interim rule took effect in January 2007 when thehigh density rule expired. The FAA has also proposed a longer-term rule at LaGuardia that is designed tocontrol air traffic congestion there indefinitely. The longer-term proposal contains several novel elementsthat could impact United’s schedule and operational performance at LaGuardia. It is not possible topredict whether or when such longer-term rules might take effect.

Legislation. The airline industry is also subject to legislative activity that can have an impact onoperations and costs. Specifically, the law that authorizes federal excise taxes and fees assessed on airlinetickets expires in September 2007. In 2007, Congress will attempt to pass comprehensive reauthorizationlegislation to impose a new funding structure and make other changes to FAA operations. Past aviationreauthorization bills have affected a wide range of areas of interest to the industry, including air trafficcontrol operations, capacity control issues, airline competition issues, aircraft and airport technologyrequirements, safety issues, taxes, fees and other funding sources.

Additionally, since September 11, 2001, aviation security has been and continues to be a subject offrequent legislative action, requiring changes to our security processes and increasing the cost of securityprocedures for the Company. The Aviation and Transportation Security Act (the “Aviation Security Act”),enacted in November 2001, has had wide-ranging effects on our operations. The Aviation Security Actmade the federal government responsible for virtually all aspects of civil aviation security, creating a newTransportation Security Administration (“TSA”), which is a part of the DHS pursuant to the HomelandSecurity Act of 2002. Under the Aviation Security Act, substantially all security screeners at airports arenow federal employees and significant other aspects of airline and airport security are now overseen by theTSA. Pursuant to the Aviation Security Act, funding for airline and airport security is provided in part by apassenger security fee of $2.50 per flight segment (capped at $10.00 per round trip), which is collected bythe air carriers from passengers and remitted to the government. In addition, air carriers are required tosubmit to the government an additional security fee equal to the amount each air carrier paid for securityscreening of passengers and property in 2000. Congress is expected to continue to focus on changes toaviation security law and requirements in 2007. Particular areas of attention that could result in increasedcosts for air carriers will likely include new requirements on cargo screening, possible deployment ofantimissile technology on passenger aircraft and potential for increased passenger and carrier security fees.

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International Regulation.

General. International air transportation is subject to extensive government regulation. Inconnection with United’s international services, the Company is regulated by both the U.S. governmentand the governments of the foreign countries United serves. In addition, the availability of internationalroutes to U.S. carriers is regulated by treaties and related aviation agreements between the U.S. andforeign governments, and in some cases, fares and schedules require the approval of the DOT and/or therelevant foreign governments.

Airport Access. Historically, access to foreign markets has been tightly controlled through bilateralagreements between the U.S. and each foreign country involved. These agreements regulate the number ofmarkets served, the number of carriers allowed to serve each market, and the frequency of carriers’ flights.Since the early 1990s, the U.S. has pursued a policy of “open skies” (meaning all carriers have access to thedestination), under which the U.S. government has negotiated a number of bilateral agreements allowingunrestricted access to foreign markets. Additionally, all of the airports that United serves in Europe andAsia maintain slot controls, and many of these are restrictive due to congestion at these airports. LondonHeathrow, Frankfurt and Tokyo Narita are among the most restrictive due to capacity limitations, andUnited has significant operations at these locations.

Further, United’s ability to serve some countries and expand into certain others is limited by theabsence altogether of aviation agreements between the U.S. and the relevant governments. Shifts in U.S.or foreign government aviation policies can lead to the alteration or termination of air service agreementsbetween the U.S. and other countries. Depending on the nature of the change, the value of United’s routeauthorities may be materially enhanced or diminished.

In February 2007, the U.S. government and the European Union (“EU”) Commission concluded thenegotiation of a proposed transatlantic aviation agreement to replace the existing bilateral arrangementsbetween the U.S. government and the EU member states. The EU Council of Transport Ministers (the“Council”) must approve the agreement by unanimous vote. The Council is scheduled to consider thematter at its next meeting in late March 2007.

The proposed U.S./EU agreement is based on the U.S. open skies model and would authorize U.S.airlines to operate between the United States and any point in the EU and beyond, free from governmentrestrictions on capacity, frequencies and scheduling and provides EU carriers with reciprocal rights inthese U.S./EU markets. Currently, only 16 of the 27 EU member states have open skies agreements withthe United States. The agreement would authorize all U.S. and EU carriers to operate services betweenthe United States and London Heathrow, thereby adding competition to United’s Heathrow operation,although Heathrow is slot and terminal constrained.

The proposed agreement would also resolve a legal issue concerning the “nationality” clauses in theexisting bilateral agreements between the United States and the EU member states. The proposedagreement would replace this clause with a community carrier clause that would allow carriers owned andcontrolled by EU citizens to operate services to the United States from any point in the EU.

The proposed agreement would confer a number of additional rights on EU carriers that are designedto redress what the EU considers to be an imbalance between U.S. carrier access to the intra-EU marketversus EU carrier access to the U.S. domestic market. In particular, EU ownership of more than50 percent of a U.S. carrier will not be presumed to violate the actual control by U.S. citizens requirement,provided foreign ownership of the voting equity of the U.S. carrier does not exceed the statutory limit of25 percent. U.S. ownership of EU carriers may not exceed 49.9 percent and the EU may enact legislationrestricting US ownership of the voting stock of EU airlines to 25 percent. The agreement also provides EUpassenger carriers with the right to operate between the U.S. and a limited number of non-EU countriesand does not provide reciprocal rights to U.S. carriers. It is uncertain at this early stage what commercialeffects these provisions may have.

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If the Council approves the agreement, it is scheduled to go into effect during the winter season of2007 with a transition to open skies for Ireland in the summer season of 2008. If the Council does notapprove the agreement, the EU Commission may call upon the member states to renounce their existingbilateral agreements with the U.S. or face infringement proceedings. If EU member states renounce theiragreements with the U.S., the status of United’s existing antitrust immunity with its European partnerswould be in doubt because the immunity is based upon an open skies agreement between the U.S. and theapplicable EU member state.

The EU Commission has or is expected to propose important new legislation by the end of 2007 thatwill also impact the Company. New proposed legislation may officially sanction secondary slot trading,which is a current practice among carriers that involves the sale, purchase or lease of slots. If adopted, thatlegislation should resolve disputes about the legality of slot exchanges at EU airports and permit carriers tocontinue with this longstanding practice. In addition, on December 20, 2006, the EU Commissionproposed legislation to include aviation within the EU’s existing emissions trading scheme. If adopted,such a measure could add significantly to the costs of operating in Europe. The precise cost to United willdepend upon the terms of the legislation enacted, which would determine whether United will be forced tobuy emission allowances and the cost at which these allowances may be obtained.

Pursuant to an agreement reached in December 2005, a full open skies agreement between the UnitedStates and Canada is likely to take effect in early 2007. The DOT is expected to finalize its tentativedecision from December 2006 approving United’s proposed 9-party antitrust immunity application(including United, Air Canada, Lufthansa, SAS, Austrian, Swiss, LOT, TAP and bmi). At that time,United and Air Canada will be permitted to expand their existing antitrust immunity beyond the currentlyallowed transborder region.

Environmental Regulation.

The airline industry is subject to increasingly stringent federal, state, local, and foreign environmentallaws and regulations concerning emissions to the air, discharges to surface and subsurface waters, safedrinking water, and the management of hazardous substances, oils, and waste materials. New regulationssurrounding the emission of greenhouse gases (such as carbon dioxide) are being considered forpromulgation both internationally and within the United States. United will be carefully evaluating thepotential impact of such proposed regulations. Other areas of developing regulations include the State ofCalifornia rule-makings regarding air emissions from ground support equipment and a federal rule-makingconcerning the discharge of deicing fluid. The airline industry is also subject to other environmental lawsand regulations, including those that require the Company to remediate soil or groundwater to meetcertain objectives. Compliance with all environmental laws and regulations can require significantexpenditures. Under the federal Comprehensive Environmental Response, Compensation and LiabilityAct, commonly known as “Superfund,” and similar environmental cleanup laws, generators of wastematerials, and owners or operators of facilities, can be subject to liability for investigation and remediationcosts at locations that have been identified as requiring response actions. The Company also conductsvoluntary environmental assessment and remediation actions. Environmental cleanup obligations can arisefrom, among other circumstances, the operation of aircraft fueling facilities, and primarily involve airportsites. Future costs associated with these activities are currently not expected to have a material adverseaffect on the Company’s business.

Employees

As of December 31, 2006, the Company and its subsidiaries had approximately 55,000 activeemployees, of whom approximately 81% were represented by various U.S. labor organizations.

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As of December 31, 2006, the employee groups, number of employees and labor organization for eachof United’s collective bargaining groups were as follows:

Employee GroupNumber ofEmployees Union(1)

Contract Openfor Amendment

Public Contact/Ramp & Stores/Food ServiceEmployees/Security Officers/MaintenanceInstructors/Fleet Technical Instructors . . . . . . . . . . . . 17,203 IAM January 1, 2010

Flight Attendants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,920 AFA January 8, 2010Pilots . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,439 ALPA January 1, 2010Mechanics & Related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,524 AMFA January 1, 2010Engineers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255 IFPTE January 1, 2010Dispatchers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 PAFCA January 1, 2010

(1) International Association of Machinists and Aerospace Workers (“IAM”), Association of Flight Attendants—CommunicationWorkers of America (“AFA”), Air Line Pilots Association (“ALPA”), Aircraft Mechanics Fraternal Association (“AMFA”),International Federation of Professional and Technical Engineers (“IFPTE”) and Professional Airline Flight ControlAssociation (“PAFCA”).

Collective bargaining agreements (“CBAs”) are negotiated under the RLA, which governs laborrelations in the air transportation industry, and such agreements typically do not contain an expirationdate. Instead, they specify an amendable date, upon which the contract is considered “open foramendment.” Before the amendable date, neither party is required to agree to modifications to thebargaining agreement. Nevertheless, nothing prevents the parties from agreeing to start negotiations or tomodify the agreement in advance of the amendable date. Contracts remain in effect while new agreementsare negotiated. During the negotiating period, both the Company and the negotiating union are requiredto maintain the status quo.

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ITEM 1A. RISK FACTORS.

The following risk factors should be read carefully when evaluating the Company’s business and theforward-looking statements contained in this report and other statements the Company or its representativesmake from time to time. Any of the following risks could materially adversely affect the Company’s business,operating results, financial condition and the actual outcome of matters as to which forward-looking statementsare made in this report.

Risks Related to the Company’s Business

Continued periods of historically high fuel costs or significant disruptions in the supply of aircraft fuel could havea material adverse impact on the Company’s operating results.

The Company’s operating results have been and continue to be significantly impacted by changes inthe availability or price of aircraft fuel. Previous record-high fuel prices increased substantially in 2006 ascompared to 2005. At times, United has not been able to increase its fares when fuel prices have risen dueto the highly competitive nature of the airline industry, and it may not be able to do so in the future.Although the Company is currently able to obtain adequate supplies of aircraft fuel, it is impossible topredict the future availability or price of aircraft fuel. In addition, from time to time the Company entersinto hedging arrangements to protect against rising fuel costs. The Company’s ability to hedge in thefuture, however, may be limited due to market conditions and other factors.

Additional terrorist attacks or the fear of such attacks, even if not made directly on the airline industry, couldnegatively affect the Company and the airline industry.

The terrorist attacks of September 11, 2001 involving commercial aircraft severely and adverselyaffected the Company’s financial condition and results of operations, as well as prospects for the airlineindustry generally. Among the effects experienced from the September 11, 2001 terrorist attacks weresubstantial flight disruption costs caused by the FAA-imposed temporary grounding of the U.S. airlineindustry’s fleet, significantly increased security costs and associated passenger inconvenience, increasedinsurance costs, substantially higher ticket refunds and significantly decreased traffic and revenue perrevenue passenger mile (“yield”).

Additional terrorist attacks, even if not made directly on the airline industry, or the fear of or theprecautions taken in anticipation of such attacks (including elevated national threat warnings or selectivecancellation or redirection of flights) could materially and adversely affect the Company and the airlineindustry. The war in Iraq and additional international hostilities could also have a material adverse impacton the Company’s financial condition, liquidity and results of operations. The Company’s financialresources might not be sufficient to absorb the adverse effects of any further terrorist attacks or anincrease in post-war unrest in Iraq or other international hostilities involving the United States.

The airline industry is highly competitive and susceptible to price discounting.

The U.S. airline industry is characterized by substantial price competition, especially in domesticmarkets. Some of our competitors have substantially greater financial resources or lower-cost structuresthan United does, or both. In recent years, the market share held by LCCs has increased significantly.Large network carriers, like United, have often had a lack of pricing power within domestic markets.

In addition, U.S. Airways, Northwest, Delta and several small U.S. competitors have recentlyreorganized or are currently reorganizing under bankruptcy protection. Other carriers could file forbankruptcy or threaten to do so to reduce their costs. Carriers operating under bankruptcy protection canoperate in a manner that could be adverse to the Company and could emerge from bankruptcy as morevigorous competitors.

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From time to time the U.S. airline industry has undergone consolidation, as in the recent merger ofU.S. Airways and America West, and may experience additional consolidation in the future. Unitedroutinely monitors changes in the competitive landscape and engages in analysis and discussions regardingits strategic position, including alliances, asset acquisitions and business combinations. If other airlinesparticipate in merger activity, those airlines may significantly improve their cost structures or revenuegeneration capabilities, thereby potentially making them stronger competitors of United.

Additional security requirements may increase the Company’s costs and decrease its traffic.

Since September 11, 2001, the DHS and the TSA have implemented numerous security measures thataffect airline operations and costs, and are likely to implement additional measures in the future. Inaddition, foreign governments have also begun to institute additional security measures at foreign airportsUnited serves. A substantial portion of the costs of these security measures is borne by the airlines andtheir passengers, increasing the Company’s costs and/or reducing its revenue.

Security measures imposed by the U.S. and foreign governments after September 11, 2001 haveincreased United’s costs and may further adversely affect the Company and its financial results. Additionalmeasures taken to enhance either passenger or cargo security procedures and/or to recover associatedcosts in the future may result in similar adverse effects.

Extensive government regulation could increase the Company’s operating costs and restrict its ability to conductits business.

Airlines are subject to extensive regulatory and legal compliance requirements that result insignificant costs. In addition to the enactment of the Aviation Security Act, laws, regulations, taxes andairport rates and charges have been proposed from time to time that could significantly increase the cost ofairline operations or reduce airline revenue. The FAA from time to time also issues directives and otherregulations relating to the maintenance and operation of aircraft that require significant expenditures bythe Company. The Company expects to continue incurring material expenses to comply with theregulations of the FAA and other agencies.

United operates under a certificate of public convenience and necessity issued by the DOT. If theDOT altered, amended, modified, suspended or revoked United’s certificate, it could have a materialadverse effect on its business. The FAA can also limit United’s airport access by limiting the number ofdeparture and arrival slots at “high density traffic airports” and local airport authorities may have theability to control access to certain facilities or the cost of access to such facilities, which could have anadverse effect on the Company’s business.

Many aspects of United’s operations are also subject to increasingly stringent federal, state and locallaws protecting the environment. Future regulatory developments in the U.S. and abroad could adverselyaffect operations and increase operating costs in the airline industry. For example, potential future actionsthat may be taken by the U.S. government, foreign governments, or the International Civil AviationOrganization to limit the emission of greenhouse gases by the aviation industry are uncertain at this time,but the impact to the Company and its industry would likely be adverse and could be significant.

The ability of U.S. carriers to operate international routes is subject to change because the applicablearrangements between the United States and foreign governments may be amended from time to time, orbecause appropriate slots or facilities may not be made available. United currently operates on a numberof international routes under government arrangements that limit the number of carriers, capacity, or thenumber of carriers allowed access to particular airports. If an open skies policy were to be adopted for anyof these routes, such an event could have a material adverse impact on the Company’s financial positionand results of operations and could result in the impairment of material amounts of related intangibleassets.

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Further, the Company’s operations in foreign countries are subject to various laws and regulations inthose countries. The Company cannot provide any assurance that current laws and regulations, or laws orregulations enacted in the future, will not adversely affect its financial condition or results of operations.

The Company’s results of operations fluctuate due to seasonality and other factors associated with the airlineindustry.

Due to greater demand for air travel during the summer months, revenues in the airline industry inthe second and third quarters of the year are generally stronger than revenues in the first and fourthquarters of the year. The Company’s results of operations generally reflect this seasonality, but have alsobeen impacted by numerous other factors that are not necessarily seasonal including, among others, theimposition of excise and similar taxes, extreme or severe weather, air traffic control delays and generaleconomic conditions. As a result, the Company’s quarterly operating results are not necessarily indicativeof operating results for an entire year and historical operating results are not necessarily indicative offuture operating results.

The Company’s financial condition and results of operations may be further affected by the future resolution ofbankruptcy-related contingencies.

Despite the Company’s exit from bankruptcy on February 1, 2006, several significant matters remainto be resolved in connection with its reorganization under Chapter 11 of the United States BankruptcyCode. Unfavorable resolution of these matters could have a material adverse effect on the Company’sbusiness. For additional detail regarding these matters, see Note 1, “Voluntary Reorganization UnderChapter 11—Bankruptcy Considerations,” in the Notes to Consolidated Financial Statements.

The Company’s initiatives to improve the delivery of its products and services to its customers, reduce costs, andincrease its revenues may not be adequate or successful.

The Company continues to identify and implement continuous improvement programs to improve thedelivery of its products and services to its customers, reduce its costs and increase its revenues. Some ofthese efforts are focused on cost savings in such areas as telecommunications, airport services, catering,maintenance materials, aircraft ground handling and regional affiliates. A number of the Company’songoing initiatives involve significant changes to the Company’s business that it may be unable toimplement successfully. The adequacy and ultimate success of the Company’s programs and initiatives toimprove the delivery of its products and services to its customers, reduce its costs and increase its revenuescannot be assured.

Union disputes, employee strikes and other labor-related disruptions may adversely affect the Company’soperations.

Approximately 81% of the employees of UAL are represented for collective bargaining purposes byU.S. labor unions. These employees are organized into six labor groups represented by six different unions.

Relations between air carriers and labor unions in the United States are governed by the RLA. Underthe RLA, a carrier must maintain the existing terms and conditions of employment following theamendable date through a multi-stage and usually lengthy series of bargaining processes overseen by theNational Mediation Board. This process continues until either the parties have reached agreement on anew CBA or the parties are released to “self-help” by the National Mediation Board. Although in mostcircumstances the RLA prohibits strikes, shortly after release by the National Mediation Board carriersand unions are free to engage in self-help measures such as strikes and lock-outs. All of the Company’sU.S. labor agreements become amendable in January 2010. There is also a risk that dissatisfied employees,either with or without union involvement, could engage in illegal slow-downs, work stoppages, partial work

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stoppages, sick-outs or other actions short of a full strike that could individually or collectively harm theoperation of the airline and impair its financial performance.

Increases in insurance costs or reductions in insurance coverage may adversely impact the Company’s operationsand financial results.

The terrorist attacks of September 11, 2001 led to a significant increase in insurance premiums and adecrease in the insurance coverage available to commercial airlines. Accordingly, the Company’s insurancecosts increased significantly and its ability to continue to obtain certain types of insurance remainsuncertain. The Company has obtained third-party war risk (terrorism) insurance through a special programadministered by the FAA, resulting in lower premiums than if it had obtained this insurance in thecommercial insurance market. Should the government discontinue this coverage, obtaining comparablecoverage from commercial underwriters could result in substantially higher premiums and more restrictiveterms, if it is available at all. If the Company is unable to obtain adequate war risk insurance, its businesscould be materially and adversely affected.

If any of United’s aircraft were to be involved in an accident, the Company could be exposed tosignificant liability. The insurance it carries to cover damages arising from any future accidents may beinadequate. If the Company’s insurance is not adequate, it may be forced to bear substantial losses from anaccident.

The Company relies heavily on automated systems to operate its business and any significant failure of thesesystems could harm its business.

The Company depends on automated systems to operate its business, including its computerizedairline reservation systems, flight operations systems, telecommunication systems and commercial websites,including united.com. United’s website and reservation systems must be able to accommodate a highvolume of traffic and deliver important flight information, as well as process critical financial transactions.Substantial or repeated website, reservations systems or telecommunication systems failures could reducethe attractiveness of United’s services versus its competitors and materially impair its ability to market itsservices and operate its flights.

The Company’s business relies extensively on third-party providers. Failure of these parties to perform asexpected, or unexpected interruptions in the Company’s relationships with these providers or their provision ofservices to the Company, could have an adverse effect on its financial condition and results of operations.

The Company has engaged a growing number of third-party service providers to perform a largenumber of functions that are integral to its business, such as operation of United Express flights, operationof customer service call centers, provision of information technology infrastructure and services, provisionof maintenance and repairs, provision of various utilities and performance of aircraft fueling operations,among other vital functions and services. The Company does not directly control these third-partyproviders, although it does enter into agreements with many of them that define expected serviceperformance. Any of these third-party providers, however, may materially fail to meet their serviceperformance commitments to the Company. The failure of these providers to adequately perform theirservice obligations, or other unexpected interruptions of services, may reduce the Company’s revenues andincrease its expenses or prevent United from operating its flights and providing other services to itscustomers. In addition, the Company’s business and financial performance could be materially harmed ifits customers believe that its services are unreliable or unsatisfactory.

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The Company’s high level of fixed obligations could limit its ability to fund general corporate requirements andobtain additional financing, could limit its flexibility in responding to competitive developments and couldincrease its vulnerability to adverse economic and industry conditions.

The Company has a significant amount of financial leverage from fixed obligations, including theAmended Credit Facility, aircraft lease and debt financings, leases of airport property and other facilities,and other material cash obligations. In addition, as of February 2, 2007, the Company had pledged all of itsavailable assets as collateral to secure its various fixed obligations, except for certain aircraft and relatedparts with an estimated current market value of approximately $2.5 billion.

The Company’s high level of fixed obligations or a downgrade in the Company’s credit ratings couldimpair its ability to obtain additional financing, if needed, and reduce its flexibility to conduct its business.Certain of the Company’s existing indebtedness also requires it to meet covenants and financial tests tomaintain ongoing access to those borrowings. See Note 11, “Debt Obligations,” in the Notes to

Consolidated Financial Statements for further details. A failure to timely pay its debts or other materialuncured breach of its contractual obligations could result in a variety of adverse consequences, includingthe acceleration of the Company’s indebtedness, the withholding of credit card sale proceeds by its creditcard service providers and the exercise of other remedies by its creditors and equipment lessors that couldresult in material adverse effects on the Company’s operations and financial condition. In such a situation,it is unlikely that the Company would be able to fulfill its obligations to repay the accelerated indebtedness,make required lease payments, or otherwise cover its fixed costs.

The Company’s net operating loss carry forward may be limited.

The Company has a net operating loss (“NOL”) carry forward of approximately $2.7 billion forfederal and state income tax purposes that primarily originated before UAL’s emergence from bankruptcyand will expire over a five to twenty year period. This tax benefit is mostly attributable to federal NOLcarry forwards of $7.0 billion. If the Company were to have a change of ownership within the meaning ofSection 382 of the Internal Revenue Code, under current conditions, its annual federal NOL utilizationcould be limited to an amount equal to its market capitalization at the time of the ownership changemultiplied by the federal long-term tax exempt rate.

To avoid a potential adverse effect on the Company’s ability to utilize its NOL carry forward forfederal income tax purposes after the Effective Date, the Company’s certificate of incorporation contains a“5% Ownership Limitation,” applicable to all stockholders except the PBGC. The 5% OwnershipLimitation remains effective until February 1, 2011. While the purpose of these transfer restrictions is toprevent a change of ownership from occurring within the meaning of Section 382 of the Internal RevenueCode (which ownership change would materially and adversely affect the Company’s ability to utilize itsNOL carry forward or other tax attributes), no assurance can be given that such an ownership change willnot occur, in which case the availability of the Company’s substantial NOL carry forward and other federalincome tax attributes would be significantly limited or possibly eliminated.

The Company has identified a material weakness in its internal control over financial reporting associated withtax accounting as of December 31, 2006 that, if not properly remediated, could result in material misstatements inits financial statements in future periods.

Based on an evaluation of our internal control over financial reporting as of December 31, 2006, ourmanagement has concluded that such internal control over financial reporting was not effective as of suchdate due to the existence of a deficiency in the operation of our internal accounting controls, whichconstituted a material weakness in our internal control over financial reporting. While the controls wereproperly designed and did not result in a material misstatement, they did not operate effectively to ensureproper accounting and disclosure of income taxes. The Company has suffered from high managementattrition during its reorganization. The material weakness was primarily related to high staff turnover inthe tax department.

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As defined in Public Company Accounting Oversight Board Auditing Standard No. 2, a materialweakness is a significant deficiency, or a combination of significant deficiencies, that results in more than aremote likelihood that a material misstatement of a Company’s annual or interim financial statements willnot be prevented or detected.

Because of this material weakness, there is a risk that a material misstatement of our annual orquarterly financial statements may not be prevented or detected. The Company has taken and willcontinue to take whatever steps are necessary to remediate the material weakness, including the hiring ofstaff, use of external advisors, as well as implementing a more rigorous review process of tax accountingand disclosure matters. We cannot guarantee, however, that such remediation efforts will correct thematerial weakness such that our internal control over financial reporting will be effective. In the event thatwe do not adequately remedy this material weakness, or if we fail to maintain effective internal controlover financial reporting in future periods, our access to capital could be adversely affected.

The Company is subject to economic and political instability and other risks of doing business globally.

The Company is a global business with operations outside of the United States from which it derivesapproximately one-third of its operating revenues. The Company’s operations in Asia, Latin America,Middle East and Europe are a vital part of its worldwide airline network. Volatile economic, political andmarket conditions in these international regions may have a negative impact on the Company’s operatingresults and its ability to achieve its business objectives. In addition, significant or volatile changes inexchange rates between the U.S. dollar and other currencies, the imposition of exchange controls or othercurrency restrictions may have a material adverse impact upon the Company’s liquidity, revenues, costs, oroperating results.

The loss of skilled employees upon whom the Company depends to operate its business or the inability to attractadditional qualified personnel could adversely affect its results of operations.

The Company believes that its future success will depend in large part on its ability to attract andretain highly qualified management, technical and other personnel. The Company may not be successful inretaining key personnel or in attracting and retaining other highly qualified personnel. Any inability toretain or attract significant numbers of qualified management and other personnel could adversely affectits business.

The Company could be adversely affected by an outbreak of a disease that affects travel behavior.

An outbreak of a disease that affects travel behavior, such as Severe Acute Respiratory Syndrome(SARS) or avian flu, could have a material adverse impact on the Company’s business, financial conditionand results of operations.

Certain provisions of the Company’s governance documents could discourage or delay changes of control orchanges to the board of directors of the Company.

Certain provisions of the amended and restated certificate of incorporation and amended and restatedbylaws of UAL (the “Governance Documents”) may make it difficult for stockholders to change thecomposition of the Company’s board of directors and may discourage takeover attempts that some of itsstockholders may consider beneficial.

Certain provisions of the Governance Documents may have the effect of delaying or preventingchanges in control if the Company’s board of directors determines that such changes in control are not inthe best interests of UAL and its stockholders.

These provisions of the Governance Documents are not intended to prevent a takeover, but areintended to protect and maximize the value of the Company’s stockholders’ interests. While theseprovisions have the effect of encouraging persons seeking to acquire control of the Company to negotiate

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with the board of directors, they could enable the board of directors to prevent a transaction that some, ora majority, of its stockholders might believe to be in their best interests and, in that case, may prevent ordiscourage attempts to remove and replace incumbent directors.

Risks Related to the Company’s Common Stock

The Company’s common stock has a limited trading history and its market price may be volatile.

Because the Company’s common stock began trading on the NASDAQ National Market onFebruary 2, 2006, there is limited trading history. The market price of its common stock may fluctuatesubstantially due to a variety of factors, many of which are beyond the Company’s control.

The issuance of additional shares of the Company’s common stock, including upon conversion of its convertiblepreferred stock and its convertible notes, could cause dilution to the interests of its existing stockholders.

In connection with the Company’s emergence from Chapter 11 bankruptcy protection, the Companyissued 5,000,000 shares of 2% convertible preferred stock. This preferred stock may be converted intoshares of the Company’s common stock upon the earlier of February 1, 2008, or upon a fundamentalchange or change in control of the Company. Further, the preferred stock is mandatorily convertible 15years from the issuance date. The Company also issued approximately $150 million in convertible 5% notesshortly after the Effective Date, and subsequently issued approximately $726 million in convertible 4.5%notes on July 25, 2006. Holders of these securities may convert them into shares of the Company’scommon stock according to their terms. If the holders of the convertible preferred stock or the holders ofthe convertible notes were to exercise their rights to convert their securities into common stock, it couldcause substantial dilution to existing stockholders. For further information, see Note 1, “VoluntaryReorganization Under Chapter 11—Bankruptcy Considerations” and Note 11—“Debt Obligations,” in theNotes to Consolidated Financial Statements.

The Company’s certificate of incorporation authorizes up to one billion shares of common stock. Incertain circumstances, the Company can issue shares of common stock without stockholder approval. Inaddition, the board of directors is authorized to issue up to 250 million shares of preferred stock withoutany action on the part of the Company’s stockholders. The board of directors also has the power, withoutstockholder approval, to set the terms of any series of shares of preferred stock that may be issued,including voting rights, conversion rights, dividend rights, preferences over the Company’s common stockwith respect to dividends or if the Company liquidates, dissolves or winds up its business and other terms.If the Company issues preferred stock in the future that has a preference over its common stock withrespect to the payment of dividends or upon its liquidation, dissolution or winding up, or if the Companyissues preferred stock with voting rights that dilute the voting power of its common stock, the rights ofholders of its common stock or the market price of its common stock could be adversely affected. TheCompany is also authorized to issue, without stockholder approval, other securities convertible into eitherpreferred stock or, in certain circumstances, common stock. In the future the Company may decide to raisecapital through offerings of its common stock, securities convertible into its common stock, or rights toacquire these securities or its common stock. The issuance of additional shares of common stock orsecurities convertible into common stock could result in dilution of existing stockholders’ equity interests inthe Company. Issuances of substantial amounts of its common stock, or the perception that such issuancescould occur, may adversely affect prevailing market prices for the Company’s common stock and theCompany cannot predict the effect this dilution may have on the price of its common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

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ITEM 2. PROPERTIES.

Flight Equipment

Details of UAL’s mainline operating fleet as of December 31, 2006 are provided in the followingtable:

Aircraft TypeAverage

No. of Seats Owned Leased TotalAverage

Age (Years)A319-100 . . . . . . . . . . . . . . . . . . . . . . . 120 33 22 55 7A320-200 . . . . . . . . . . . . . . . . . . . . . . . 148 42 55 97 9B737-300 . . . . . . . . . . . . . . . . . . . . . . . 123 15 49 64 18B737-500 . . . . . . . . . . . . . . . . . . . . . . . 108 30 — 30 15B747-400 . . . . . . . . . . . . . . . . . . . . . . . 347 18 12 30 11B757-200 . . . . . . . . . . . . . . . . . . . . . . . 172 45 52 97 15B767-300 . . . . . . . . . . . . . . . . . . . . . . . 213 17 18 35 12B777-200 . . . . . . . . . . . . . . . . . . . . . . . 267 46 6 52 8

Total Operating Fleet . . . . . . . . . . . . 246 214 460 12

As of December 31, 2006, all of the aircraft owned by UAL were encumbered under debt agreements.The amendment of the Credit Facility, creating the Amended Credit Facility on February 2, 2007, enabledthe Company to remove 101 aircraft from the Amended Credit Facility collateral pool. For additionalinformation on aircraft financings see Note 11, “Debt Obligations” and Note 16, “Lease Obligations,” inthe Notes to Consolidated Financial Statements.

Ground Facilities

United has entered into various leases relating to its use of airport landing areas, gates, hangar sites,terminal buildings and other airport facilities in most of the municipalities it serves. These leases weresubject to assumption or rejection under the Chapter 11 process. As of December 31, 2006, United hadassumed major facility leases in Washington (Dulles and Reagan), Denver (terminal lease only), SanFrancisco, Newark (terminal lease only), Austin, Cleveland, Columbus, Detroit (terminal lease only), LasVegas, Oakland, Portland, Fort Meyers (fuel system lease only), Orange County and Tucson. Major facilityleases expire at San Francisco in 2011 and 2013, Washington Dulles in 2014, Chicago O’Hare in 2018, LosAngeles in 2021 and Denver in 2025.

The Company owns a 66.5-acre complex in suburban Chicago consisting of more than 1 million squarefeet of office space for its former world headquarters, a computer facility and a training center. United alsoowns a flight training center, located in Denver, which accommodates 36 flight simulators and more than90 computer-based training stations. The Company owns a limited number of other properties, including areservations facility in Denver and a crew hotel in Honolulu. All of these facilities are mortgaged.

Beginning in March 2007, the Company will move approximately 350 management employees,including its senior management, to its new headquarters in downtown Chicago. The Company’s newcorporate headquarters will be located at 77 West Wacker Drive, where the Company leases approximately137,000 square feet of office space. The Company’s former world headquarters, located in suburban ElkGrove Township, will become the Operations Center. Consistent with the Company’s goals of achievingadditional cost savings and operational efficiencies, the Company will relocate employees from several ofits other suburban Chicago facilities into the new Operations Center.

The Company’s Maintenance Operation Center at San Francisco International Airport occupies130 acres of land, 2.9 million square feet of floor space and 9 aircraft hangar bays under a lease expiring in2013.

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United’s off-airport leased properties historically included a number of ticketing, sales and generaloffice facilities in the downtown and suburban areas of most of the larger cities within the United system.As part of the Company’s restructuring and cost containment efforts, United closed, terminated or rejectedall of its former domestic city ticket office leases. United continues to lease and operate a number ofadministrative, reservations, sales and other support facilities worldwide. United also continues to evaluateopportunities to reduce space requirements at its airports and off-airport locations.

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ITEM 3. LEGAL PROCEEDINGS.

In re: UAL Corporation, et. al.

As discussed above, on the Petition Date the Debtors filed voluntary petitions to reorganize theirbusinesses under Chapter 11 of the Bankruptcy Code. On October 20, 2005, the Debtors filed the Debtor’sFirst Amended Joint Plan of Reorganization Pursuant to Chapter 11 of the United States BankruptcyCode and the Disclosure Statement. The Bankruptcy Court approved the Disclosure Statement onOctober 21, 2005.

Commencing on October 27, 2005, the Disclosure Statement, ballots for voting to accept or reject theproposed plan of reorganization and other solicitation documents were distributed to all classes ofcreditors eligible to vote on the proposed plan of reorganization. After a hearing on confirmation, onJanuary 20, 2006, the Bankruptcy Court confirmed the Plan of Reorganization. The Plan ofReorganization became effective and the Debtors emerged from bankruptcy protection on the EffectiveDate.

Numerous pre-petition claims still await resolution in the Bankruptcy Court due to the Company’sobjections to either the existence of liability or the amount of the claim. The process of determiningwhether liability exists and liquidating the amounts due is likely to continue through 2007. Additionally,certain significant matters remain to be resolved in the Bankruptcy Court. For details see Note 1,“Voluntary Reorganization Under Chapter 11—Bankruptcy Considerations,” in the Notes to Consolidated

Financial Statements.

Air Cargo/Passenger Surcharge Investigations

In February 2006, the European Commission and the U.S. Department of Justice commenced aninternational investigation into what government officials describe as a possible price fixing conspiracyrelating to certain surcharges included in tariffs for carrying air cargo. In June 2006, United received asubpoena from the U.S. Department of Justice requesting information related to certain passenger pricingpractices and surcharges applicable to international passenger routes. The Company is cooperating fully.United is considered a source of information for the investigation, not a target. In addition to the federalgrand jury investigation, United and other air cargo carriers have been named as defendants in over ninetyclass action lawsuits alleging civil damages as a result of the purported air cargo pricing conspiracy. Thoselawsuits have been consolidated for pretrial activities in the United States Federal Court for the EasternDistrict of New York. United has entered into an agreement with the majority of the private plaintiffs todismiss United from the class action lawsuits in return for an agreement to cooperate with the plaintiffs’factual investigation. More than fifty additional putative class actions have also been filed allegingviolations of the antitrust laws with respect to passenger pricing practices. Those lawsuits have beenconsolidated for pretrial activities in the United States Federal Court for the Northern District ofCalifornia (“Federal Court”). United has entered a settlement agreement with a number of the plaintiffs inthe passenger pricing cases to dismiss United from the class action lawsuits in return for an agreement tocooperate with the plaintiffs’ factual investigation. The settlement agreement is subject to review andapproval by the Federal Court. Penalties for violating competition laws can be severe, involving bothcriminal and civil liability. The Company is cooperating with the grand jury investigations while carryingout its own internal review of its pricing practices, and is not in a position to evaluate the potential financialimpact of this litigation at this time. However, a finding that the Company violated either U.S. antitrustlaws or the competition laws of some other jurisdiction could have a material adverse impact on theCompany.

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Summers v. UAL Corporation ESOP, et. al.

Certain participants in the UAL Corporation Employee Stock Ownership Plan (“ESOP”) sued theESOP, the ESOP Committee and State Street Bank and Trust Company (“State Street”) in the U.S.District Court for the Northern District of Illinois (“the District Court”) in February 2003 seekingmonetary damages in a purported class action that alleges that the ESOP Committee breached its fiduciaryduty by not selling UAL stock held by the ESOP commencing as of July 19, 2001. The ESOP Committeeappointed State Street in September 2002 to act as investment manager and fiduciary to manage the assetsof the ESOP itself. In August 2005, a proposed settlement was reached between the plaintiffs and theESOP Committee defendants. The agreed upon settlement amount is to be paid out of the $5.2 million ininsurance proceeds remaining after deducting legal fees. State Street objected to the agreement during therequired fairness hearing before the District Court. The Court nevertheless approved the settlement inOctober 2005, but also granted State Street’s motion for summary judgment, dismissing the underlyingclaims. Both sides appealed from the District Court’s decision, and as a result, no settlement funds havebeen disbursed pending a ruling on appeal. In June 2006, the United States Court of Appeals for theSeventh Circuit (“Court of Appeals”) affirmed the lower court’s ruling dismissing the claims against StateStreet and in effect rendering State Street’s challenge to the settlement agreement moot. Both partiesrequested the United States Supreme Court (“Supreme Court”) to review the decision of the Court ofAppeals. On February 20, 2007, the Supreme Court declined both parties’ requests to review the Court ofAppeals decision, bringing this dispute to a final conclusion and foreclosing any potential claim forindemnity against the Company.

Litigation Associated with September 11 Terrorism

Families of 94 victims of the September 11 terrorist attacks filed lawsuits asserting a variety of claimsagainst the airline industry. United and American Airlines, as the two carriers whose flights were hijacked,are the central focus of the litigation, but a variety of additional parties have been sued on a number oflegal theories ranging from collective responsibility for airport screening and security systems that allegedlyfailed to prevent the attacks to faulty design and construction of the World Trade Center towers. In excessof 97% of the families of the deceased victims received awards from the September 11th VictimsCompensation Fund of 2001, which was established by the federal government, and consequently are nowbarred from making further claims against the airlines. World Trade Center Properties, Inc. and The PortAuthority of New York and New Jersey have filed cross-claims in the wrongful death litigation against allof the aviation defendants as owners of the World Trade Center property for property damage sustained inthe attacks. The insurers of various tenants at the World Trade Center have filed subrogation claims fordamages as well. In the aggregate, September 11th claims are estimated to be well in excess of $10 billion.By statute, these matters were consolidated in the U.S. District Court for the Southern District of NewYork, and airline exposure was capped at the limit of the liability coverage maintained by each carrier atthe time of the attacks. In the personal injury and wrongful death matters, settlement discussions continueand the parties have reached settlements in several matters. The Company anticipates that any liability itmay face arising from the events of September 11, 2001 could be significant, but will be subject to thestatutory limitation to the amount of its insurance coverage.

Environmental Proceedings

In accordance with an order issued by the California Regional Water Quality Control Board inJune 1999, United, along with most of the other tenants of the San Francisco International Airport, hasbeen investigating potential environmental contamination at the airport (geographically including United’sSan Francisco maintenance center) and conducting monitoring and/or remediation when needed. United’sprojected costs associated with this order were significantly reduced in 2006; therefore, the Companydoes not consider this to be a material proceeding.

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United recently completed negotiations with the Bay Area Air Quality Management Districtregarding notices of violations received at its San Francisco maintenance center and payment of associatedpenalties.

Internal Revenue Service Matter

In 1999, UAL Corporation entered into a restructuring of its risk management function for retireemedical benefits in an attempt to control the spiraling costs of medical care. As part of the redesign of thisfunction, UAL partnered with Blue Cross Blue Shield of Illinois-Health Care Service Corporation. Uponaudit of UAL’s 1999 federal income tax return, the U.S. Internal Revenue Service (“IRS”) took theposition that this restructuring was the same as, or substantially similar to, a listed tax shelter transaction.The IRS proposed a penalty for “gross valuation misstatement” under Section 6662(h)(1) of the InternalRevenue Code in the amount of approximately $16 million. The settlement of the issue resulted in apenalty payment by UAL in 2006 in the amount of approximately $2 million.

Other Legal Proceedings

UAL and United are involved in various other claims and legal actions involving passengers,customers, suppliers, employees and government agencies arising in the ordinary course of business.Additionally, from time to time, the Company becomes aware of potential non-compliance with applicableenvironmental regulations, which have either been identified by the Company (through internalcompliance programs such as its environmental compliance audits) or through notice from a governmentalentity. In some instances, these matters could potentially become the subject of an administrative orjudicial proceeding and could potentially involve monetary sanctions. After considering a number offactors, including (but not limited to) the views of legal counsel, the nature of contingencies to which theCompany is subject and prior experience, management believes that the ultimate disposition of thesecontingencies will not materially affect its consolidated financial position or results of operations.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

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EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of the Company and United are listed below, along with their ages as ofDecember 31, 2006, tenure as officer, and business background for at least the last five years.

Jane Allen. Age 55. Ms. Allen has been Senior Vice President—Human Resources of United (airtransportation) since May 2006. From June 2003 to May 2006, Ms. Allen served as Senior Vice Presidentof Onboard Services for United. Before joining United, Ms. Allen served as the head of American Airlines’Flight Services (air transportation) from 1997 to 2003.

Graham W. Atkinson. Age 55. Mr. Atkinson has been Executive Vice President—Chief CustomerOfficer for United since September 2006. From January 2004 to September 2006, Mr. Atkinson served asSenior Vice President—Worldwide Sales and Alliances for United. From June 2001 to January 2004,Mr. Atkinson served as Senior Vice President—International for United.

Frederic F. Brace. Age 49. Mr. Brace has been Executive Vice President and Chief Financial Officerof the Company and United since August 2002. From September 2001 to August 2002, Mr. Brace served asthe Company and United’s Senior Vice President and Chief Financial Officer.

Sara A. Fields. Age 63. Ms. Fields has been Senior Vice President—Office of the Chairman ofUnited since May 2006. From December 2002 to May 2006, Ms. Fields served as Senior Vice President—People of United. From January to December 2002, Ms. Fields served as United’s Senior Vice President—People Services and Engagement. From July 1994–July 2002, Ms. Fields previously served as Senior VicePresident—Onboard Service of United.

Gerald F. Kelly. Age 59. Mr. Kelly has been Senior Vice President—Continuous Improvement,Strategic Sourcing and Chief Information Officer (“CIO”) of United since November 2005. From 2002 to2005, Mr. Kelly served as CIO and Senior Vice President for Procurement and Continuous Improvementat Sears, Roebuck & Co. (retailer), from which he retired in April 2005. From 2001 to 2002, Mr. Kellyserved as Business Advisor to Williams-Sonoma (retailer).

Paul R. Lovejoy. Age 52. Mr. Lovejoy has been Senior Vice President, General Counsel andSecretary of the Company and United since June 2003. From September 1999 to June 2003, Mr. Lovejoywas a partner with Weil, Gotshal & Manges LLP (law firm).

Peter D. McDonald. Age 55. Mr. McDonald has been Executive Vice President and Chief OperatingOfficer of the Company and United since May 2004. From September 2002 to May 2004, Mr. McDonaldserved as Executive Vice President—Operations of the Company and United. From January toSeptember 2002, Mr. McDonald served as United’s Senior Vice President—Airport Operations. FromMay 2001 to January 2002, Mr. McDonald served as United’s Senior Vice President—Airport Services.

Rosemary Moore. Age 56. Ms. Moore has been the Senior Vice President—Corporate andGovernment Affairs of United since December 2002. From November to December 2002, Ms. Moore wasthe Senior Vice President—Corporate Affairs of United. From October 2001 to October 2002, Ms. Moorewas the Vice President—Public and Government Affairs of ChevronTexaco Corporation (global energy).

John P. Tague. Age 44. Mr. Tague has been Executive Vice President—Chief Revenue Officer ofthe Company and United since April 2006. From May 2004 to April 2006, he served as Executive VicePresident—Marketing, Sales and Revenue of the Company and United. From May 2003 to May 2004,Mr. Tague was Executive Vice President—Customer of the Company and United. From 1997 toAugust 2002, Mr. Tague was the President and Chief Executive Officer of ATA Holdings Corp. (airtransportation).

Glenn F. Tilton. Age 58. Mr. Tilton has been Chairman, President and Chief Executive Officer ofthe Company and United since September 2002. From October 2001 to August 2002, Mr. Tilton served as

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Vice Chairman of ChevronTexaco Corporation (global energy). Previously, Mr. Tilton served as Chairmanand Chief Executive Officer of Texaco Inc. (global energy), a position he assumed in February 2001.

There are no family relationships among the executive officers or the directors of the Company. Theexecutive officers are elected by the Board each year, and hold office until the organization meeting of theBoard in the next subsequent year and until his or her successor is chosen or until his or her earlier death,resignation or removal.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Shares of UAL Common Stock issued and outstanding immediately before the Effective Date (the“Old Common Stock”) traded on the over-the-counter market (OTCBB) under the symbol UALAQ.OBfrom April 3, 2003 to February 1, 2006. On February 1, 2006, the Old Common Stock was canceledpursuant to the terms of the Plan of Reorganization and the Company has no continuing obligations underthe Old Common Stock.

Pursuant to the Plan of Reorganization, the Company issued or reserved for issuance up to125,000,000 shares of common stock (the “New Common Stock”) comprised of: (a) 115,000,000 shares tobe distributed to unsecured creditors and employees in accordance with the terms of the Plan ofReorganization; (b) up to 9,825,000 shares and options (or other rights to acquire shares) pursuant to theterms of the MEIP; and (c) up to 175,000 shares and options (or other rights to acquire shares) pursuant tothe terms of the DEIP. Beginning February 2, 2006, the New Common Stock has traded on a NASDAQmarket under the symbol UAUA.

The following table sets forth the ranges of high and low sales prices per share of the Old CommonStock and New Common Stock during the last two completed fiscal years.

Old Common Stock New Common StockHigh Low High Low

2006:1st quarter . . . . . . . $1.18 $0.02 $43.00 $29.512nd quarter . . . . . . (a) (a) 40.05 26.023rd quarter . . . . . . (a) (a) 32.17 21.904th quarter . . . . . . (a) (a) 46.54 26.77

2005:1st quarter . . . . . . . $1.51 $0.89 (b) (b)2nd quarter . . . . . . 2.40 0.92 (b) (b)3rd quarter . . . . . . 1.62 0.32 (b) (b)4th quarter . . . . . . 1.35 0.49 (b) (b)

(a) The Old Common Stock was canceled pursuant to the terms of the Plan of Reorganization and no further tradingoccurred after February 1, 2006.

(b) The New Common Stock commenced trading on February 2, 2006.

The Company suspended the payment of cash dividends on the Old Common Stock in 2002 and doesnot currently anticipate paying dividends on the New Common Stock. Additionally, under the provisions ofthe Amended Credit Facility the Company’s ability to pay dividends on or repurchase New Common Stockis restricted. See Note 11, “Debt Obligations,” in the Notes to Consolidated Financial Statements for moreinformation related to dividend restrictions under the Amended Credit Facility. Any future determinationto pay dividends will be at the discretion of the board of directors, subject to applicable limitations underDelaware law.

Based on reports by the Company’s transfer agent for the New Common Stock, there wereapproximately 1,200 record holders of its New Common Stock as of February 28, 2007.

The following graph shows the cumulative total shareholder return for the New Common Stock during theperiod from February 2, 2006 to December 31, 2006. Five year historical data is not presented as a result ofthe significant period the Company was in bankruptcy and since the financial results of the SuccessorCompany are not comparable with the results of the Predecessor Company, as discussed in Item 6. SelectedFinancial Data on page 32.

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The graph also shows the cumulative returns of the S&P 500 Index and the AMEX Airline Index(“AAI”) of eleven investor-owned airlines. The comparison assumes $100 was invested on February 2,2006 (the date UAUA began trading on NASDAQ) in New Common Stock and in each of the indicesshown and assumes that all dividends paid were reinvested.

Performance Graph

$60

$80

$100

$120

$140

$120

$140

02/02/06

UAUAS&P 500 Index

AAI Index

03/31/06 06/30/06 09/30/06 12/31/06

$100.00$100.00$100.00

$111.26$101.89$107.43 $103.60 $95.01

$105.12

$122.60

$111.60$112.23

$86.43 $74.03$99.95

Note: The stock price performance shown in the graph above should not be considered indicative of potential futurestock price performance.

Common stock repurchases in the fourth quarter of fiscal year 2006 were as follows:

Period

Total numberof shares

purchased(a)

Average pricepaid

per share

Total number ofshares purchased as

part of publiclyannounced plans

or programs

Maximum number ofshares (or approximatedollar value) of shares

that may yet bepurchased under theplans or programs

10/01/06-10/31/06 . . . . . . . — $ — — (b)

11/01/06-11/30/06 . . . . . . . 2,195 38.80 — (b)

12/01/06-12/31/06 . . . . . . . 767 41.09 — (b)

Total . . . . . . . . . . . . . . . . . . 2,962 $39.40 — (b)

(a) Shares withheld from employees to satisfy certain tax obligations due upon the vesting of restrictedstock.

(b) The MEIP provides for the withholding of shares to satisfy tax obligations due upon the vesting ofrestricted stock. The MEIP does not specify a maximum number of shares that may be repurchased.

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ITEM 6. SELECTED FINANCIAL DATA.

In connection with its emergence from Chapter 11 bankruptcy protection, the Company adoptedfresh-start reporting in accordance with SOP 90-7 and in conformity with accounting principles generallyaccepted in the United States of America (“GAAP”). As a result of the adoption of fresh-start reporting,the financial statements prior to February 1, 2006 are not comparable with the financial statements afterFebruary 1, 2006. References to “Successor Company” refer to UAL on or after February 1, 2006, aftergiving effect to the adoption of fresh-start reporting. References to “Predecessor Company” refer to UALprior to February 1, 2006.

Successor PredecessorPeriod from

February 1 toDecember 31,

Period fromJanuary 1 toJanuary 31, Year Ended December 31,

(In millions, except rates) 2006 2006 2005 2004 2003 2002

Income Statement Data:Operating revenues . . . . . . . . . . . . . . . . . . . . $ 17,882 $ 1,458 $ 17,379 $ 16,391 $ 14,928 $ 15,822Operating expenses . . . . . . . . . . . . . . . . . . . . 17,383 1,510 17,598 17,245 16,288 18,659Fuel expenses—mainline . . . . . . . . . . . . . . . 4,462 362 4,032 2,943 2,072 1,921Reorganization (income) expense . . . . . . . . — (22,934) 20,601 611 1,173 10Net income (loss)(a) . . . . . . . . . . . . . . . . . . . 25 22,851 (21,176) (1,721) (2,808) (3,212)Basic earnings (loss) per share . . . . . . . . . . . 0.14 (196.61) (182.29) (15.25) (27.36) (53.55)Diluted earnings (loss) per share . . . . . . . . . 0.14 (196.61) (182.29) (15.25) (27.36) (53.55)Cash dividends declared per common

share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — — —

Balance Sheet Data at period-end:Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,369 $ 19,555 $ 19,342 $ 20,705 $ 21,979 $ 23,656Long-term debt and capital lease obligations,

including current portion . . . . . . . . . . . . . 10,600 1,432 1,433 1,204 852 700Liabilities subject to compromise . . . . . . . . . — 36,336 35,016 16,035 13,964 13,833

Mainline Operating Statistics(b):RPMs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,470 (b) 114,272 115,198 104,464 109,460ASMs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143,095 (b) 140,300 145,361 136,630 148,827Passenger load factor . . . . . . . . . . . . . . . . . . 82.1% (b) 81.4% 79.2% 76.5% 73.5%Yield(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.19¢ (b) 11.25¢ 10.83¢ 10.79¢ 11.06¢Passenger revenue per ASM (PRASM). . . . 10.04¢ (b) 9.20¢ 8.63¢ 8.32¢ 8.19¢Operating revenue per ASM (RASM)(d) . . 11.49¢ (b) 10.66¢ 9.95¢ 9.81¢ 9.77¢Operating expense per ASM (CASM)(e) . . 11.23¢ (b) 10.59¢ 10.20¢ 10.52¢ 11.45¢Fuel gallons consumed . . . . . . . . . . . . . . . . . 2,290 (b) 2,250 2,349 2,202 2,458Average price per gallon of jet fuel,

including tax and hedge impact. . . . . . . . . 210.7¢ (b) 179.2¢ 125.3¢ 94.1¢ 78.2¢

(a) Net income (loss) was significantly impacted in the Predecessor Company periods due to the reorganization itemsrelated to the Company’s restructuring in bankruptcy.

(b) Mainline operations exclude the operations of independent regional carriers operating as United Express. Statisticsincluded in the Successor period were calculated using the combined results of the Successor period from February 1 toDecember 31, 2006 and the Predecessor January 2006 period.

(c) Yield is mainline passenger revenue excluding industry and employee discounted fares per RPM.

(d) RASM is operating revenues excluding United Express passenger revenue per ASM.

(e) CASM is operating expenses excluding United Express operating expenses per ASM.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS.

Overview

As discussed further in Item 1. Business, the Company derives virtually all of its revenues from airlinerelated activities. The most significant source of airline revenues is passenger revenues; however, MileagePlus, United Cargo, and United Services are also significant sources of operating revenues. The airlineindustry is highly competitive, and is characterized by intense price competition. Fare discounting byUnited’s competitors has historically had a negative effect on the Company’s financial results because it isgenerally required to match competitors’ fares to maintain passenger traffic. Future competitive fareadjustments may negatively impact the Company’s future financial results. The Company’s most significantoperating expense is jet fuel. Jet fuel prices are extremely volatile and are largely uncontrollable by theCompany. UAL’s historical and future earnings have been and will continue to be significantly impacted byjet fuel prices. The impact of recent jet fuel price increases is discussed below. The Company’s results in2006 were significantly impacted by the adoption of fresh-start reporting upon its emergence frombankruptcy. See the “Fresh-Start Reporting” section below for a discussion of the of the significant fresh-start items that impacted the Company’s earnings in 2006.

Bankruptcy Matters. On December 9, 2002, UAL, United and 26 direct and indirect wholly-ownedsubsidiaries filed voluntary petitions to reorganize its business under Chapter 11 of the Bankruptcy Court.The Company emerged from bankruptcy on February 1, 2006, under a Plan of Reorganization that wasapproved by the Bankruptcy Court. In connection with its emergence from Chapter 11 bankruptcyprotection, the Company adopted fresh-start reporting, which resulted in significant changes in post-emergence financial statements, as compared to UAL’s historical financial statements, as is furtherdiscussed in the “Financial Results” section below. Also, see Note 1, “Voluntary Reorganization UnderChapter 11—Bankruptcy Considerations,” in the Notes to Consolidated Financial Statements and Item 1.

Business for further information regarding bankruptcy matters.

Recent Developments. The Company believes its restructuring has made the Company competitivewith its network airline peers. The Company’s financial performance has continued to improve despitesignificant increases in fuel prices, as noted below. Average mainline unit fuel expense has increased 68%from 2004 to 2006, which has negatively impacted the Company’s operating margin. However, theCompany has been able to overcome rising fuel costs through its restructuring accomplishments, improvedrevenues and other means, which have contributed to the generation of operating income of $447 millionin calendar-year 2006, as compared to operating losses of $219 million and $854 million in 2005 and 2004,respectively.

United seeks to continuously improve the delivery of its products and services to its customers, reduceunit costs, and increase unit revenues. Together with these initiatives, some of the Company’s moresignificant recent developments are noted as follows:

• In February 2007, the Company prepaid $972 million of Credit Facility debt and amended certainterms of the Credit Facility. The Amended Credit Facility requires significantly less collateral ascompared to the Credit Facility and is expected to provide net interest expense savings ofapproximately $70 million annually. This amount represents the net impact of reduced interestexpense and interest income as a result of lower cash and debt balances, as well as a more favorableinterest rate on the Amended Credit Facility. See the “Liquidity and Capital Resources” section,below, and Note 11, “Debt Obligations,” in the Notes to Consolidated Financial Statements forfurther information related to this new facility.

• In 2006, the Company announced a program to reduce then-projected 2007 expenses by$400 million. The Company has identified specific programs to realize these savings, and continues

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to identify and evaluate other savings opportunities. For example, the Company expects to reducecosts by approximately $200 million through savings in such areas as telecommunications, airportservices, catering, maintenance materials and aircraft ground handling. The Company also expectsto reduce advertising and marketing costs by as much as $60 million. Increased operationalefficiencies, through the implementation of such initiatives as a new flight planning system andreduced block times are expected to generate approximately $40 million in savings. In addition, theCompany estimates it will achieve a $100 million reduction in general and administrative expenses,which includes a reduction of salaried and management positions. The Company realizedapproximately $135 million of the projected $400 million of 2007 cost reductions in 2006, and is ontrack to achieve $265 million of projected cost savings in 2007.

• In the second quarter of 2006, the General Services Administration (“GSA”) awarded its annualU.S. government employee travel contracts for its upcoming fiscal year beginning October 1, 2006.The GSA selected United to provide certain air transportation services for which the estimatedannual revenue to United will be approximately $540 million, or 27.4% of the total estimated GSAemployee travel award. This award level represents a 6.7 point increase over the prior contract year.

• Effective September 2006, United began charging travel agents within North America a $3.50 perpassenger segment fee if low cost booking channels are not used. In 2006, United also renegotiatedits agreements with four major GDS providers to allow access to low cost booking options forUnited’s appointed travel agencies. Increased use of low cost booking channels is expected toreduce United’s product distribution expenses.

• In the third quarter of 2006, United announced the addition of 22 new flights from WashingtonDulles, which increased departures from Dulles by 14 percent in the fall of 2006 as compared to thefall of 2005. In early 2007, the DOT awarded United the route between Washington Dulles-Beijingand this nonstop service will commence on March 28, 2007. The Company plans to reallocateexisting aircraft to serve this new route.

• The Company continues to identify and implement continuous improvement programs, and isactively training key employees in continuous improvement strategies and techniques. Theseinclude such initiatives as optimization of aircraft and airport facilities and selected outsourcing ofactivities to more cost-effective service providers. The Company expects that these programs, aswell as the aforementioned expense reduction programs, will produce economic benefits which willbe necessary to mitigate inflationary cost pressures in other categories of operating expenses, suchas airport usage fees, aircraft maintenance, and employee healthcare benefits, among others.

Financial Results. Upon UAL’s emergence from Chapter 11 bankruptcy protection, the Companyadopted fresh-start reporting in accordance with SOP 90-7. Thus, the consolidated financial statementsbefore February 1, 2006 reflect results based upon the historical cost basis of the Company while the post-emergence consolidated financial statements reflect the new basis of accounting, which incorporates fairvalue adjustments recorded from the application of SOP 90-7. Therefore, financial statements for the post-emergence periods are not comparable to the pre-emergence period financial statements. The adoption offresh-start reporting had a significantly negative impact on the Company’s results of operations. Thesignificant differences in accounting results are discussed under “Fresh-Start Reporting,” below.

For purposes of providing management’s year-over-year discussions of UAL’s financial condition andresults of operations, management has compared the combined 2006 annual results consisting of theSuccessor Company’s results for the eleven months ended December 31, 2006 and the PredecessorCompany’s January 2006 results, to the Predecessor Company’s annual 2005 and 2004 results. Referencesto “Successor Company” refer to UAL on or after February 1, 2006, after giving effect to the adoption offresh-start reporting. References to “Predecessor Company” refer to UAL before its exit from bankruptcyon February 1, 2006.

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The table below presents a reconciliation of the Company’s net income (loss) to net income (loss),excluding reorganization items for the three years ended December 31, 2006. Presentation of results forthe combined twelve month period of 2006, as described in the preceding paragraph, and the presentationof net income excluding reorganization items, are non-GAAP measures. However, the Company believesthat these year-over-year comparisons of the results of operations, as shown in the table below, providemanagement and investors a useful perspective of the Company’s core business and on-going operationaland financial performance and trends, since reorganization items pertain to accounting for the effects ofthe bankruptcy restructuring and are not recurring. In addition, the combined twelve month period of 2006is presented to improve comparability with the full years of 2005 and 2004.

Combined PredecessorPredecessor Successor Twelve Twelve Twelve

(In millions)

Period fromJanuary 1

to January 31,

Period fromFebruary 1 toDecember 31,

MonthsEnded

December 31,

MonthsEnded

December 31,

MonthsEnded

December 31,2006 2006 2006(a) 2005 2004

Net income (loss) . . . . . . . . . . . . . . $ 22,851 $25 $ 22,876 $(21,176) $(1,721)Reorganization items, net. . . . . (22,934) — (22,934) 20,601 611

Net income (loss), excludingreorganization items, net . . . . . $ (83) $25 $ (58) $ (575) $(1,110)

(a) The combined period includes the results for one month ended January 31, 2006 (PredecessorCompany) and eleven months ended December 31, 2006 (Successor Company).

The Company’s improved results of operations in 2006, as compared with 2005 and 2004, wereinfluenced by a number of significant factors, including fresh-start reporting and other factors that aredescribed below.

Fresh-Start Reporting.

Under fresh-start reporting at the Effective Date, the Company’s asset values were remeasured usingfair value, and were allocated in conformity with Statement of Financial Accounting Standards No. 141,“Business Combinations” (“SFAS 141”). The excess of reorganization value over the net fair value oftangible and identifiable intangible assets and liabilities was recorded as goodwill. In addition, fresh-startaccounting also requires that all assets and liabilities be stated at fair value or at the present values of theamounts to be paid using appropriate market interest rates, except for deferred taxes, which are accountedfor in conformity with Statement of Financial Accounting Standards No. 109 “Accounting for Income

Taxes” (“SFAS 109”). The Company’s results in 2006 were significantly impacted by fresh-start reportingand other non-cash expenses; the most significant impacts are discussed below.

• As part of fresh-start reporting the Company changed its accounting for Mileage Plus from theincremental cost model to the deferred revenue model. Under the incremental cost method, theestimated liability was based on incremental costs and adjustments were made to both operatingrevenues and advertising expense. Under the deferred revenue model a portion of ticket revenuefrom Mileage Plus members, and other qualifying mileage transactions, is allocated to deferredrevenue at fair value to reflect the Company’s obligation for future award redemptions. This changein accounting negatively impacted the Company’s operating revenues by approximately $158 millionin 2006 as compared to 2005. The negative revenue impact was partially offset by a reduction inadvertising expense of approximately $27 million which the Company estimates would have beenrecorded if the incremental cost method had been continued. Mileage Plus accounting is discussedfurther in “Critical Accounting Policies,” below.

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• The Company recorded non-cash share-based compensation expense of $159 million in 2006 inassociation with its MEIP and DEIP plans as approved under the Plan of Reorganization. Thisexpense was not recognized in 2005 and 2004, because prior to 2006 the Company accounted for itsshare-based compensation plans under the intrinsic method prescribed by Accounting PrinciplesBoard Opinion No. 25, “Accounting for Stock Issued to Employees.”

• In 2006, the Company recognized non-cash depreciation and amortization charges of $74 million onassets that were recorded at fair value as part of fresh-start reporting, including definite-livedintangible assets that were recognized under fresh-start accounting. UAL did not recognize similarasset values or related amortization expense in the preceding annual periods.

• The adjustment of the Company’s postretirement plan liabilities to fair value at fresh-start resultedin the elimination of unrecognized prior service credits and actuarial losses for its non-pensionpostretirement plan. The elimination of these unrecognized items negatively impacted theCompany’s 2006 expenses by approximately $51 million.

• Aircraft rent was negatively impacted by approximately $101 million. This included an unfavorableimpact of $66 million related to deferred gains on pre-emergence sale-leaseback transactions thatwere eliminated as part of fresh-start reporting. Before fresh-start reporting, these deferred gainswere being amortized into earnings over the lease terms as a reduction of the related aircraft rentexpense. Also due to the restructuring of aircraft financings in bankruptcy, the Company’soperating leases were at average rates below market value; therefore, a deferred charge wasrecorded to adjust these leases to fair value. Amortization of this deferred charge resulted inadditional rent expense of approximately $35 million in 2006.

• The Company recognized additional non-cash interest expense of approximately $51 million for theamortization of debt and capital lease obligation discounts that were recorded upon its emergencefrom bankruptcy to adjust its debt and capital lease obligations to fair value.

• At UAL’s emergence from bankruptcy, there were certain unresolved matters which are consideredto be preconfirmation contingencies. The Company initially recorded an obligation for its bestestimate of the amounts it expected to pay to resolve these matters. Adjustments to these initialestimates are recorded in current results of operations. The most significant of these were classifiedas Special items in the Company’s 2006 Statement of Consolidated Operations and include a netbenefit of $12 million related to the San Francisco International Airport (“SFO”) and Los AngelesInternational Airport (“LAX”) municipal bond obligations and a benefit of $24 million related tothe termination of certain of the Company’s non-qualified pension plans. The Company adjusted itsestimated liabilities for these preconfirmation contingencies during the eleven months endedDecember 31, 2006 to the amounts the Company now believes to be probable based on courtrulings and other updated information. In addition to the special items previously noted, otheraccruals and accrual adjustments provided an additional net benefit of approximately $29 million to2006 operating expenses. See Note 1, “Voluntary Reorganization Under Chapter 11—ClaimsResolution Process,” in the Notes to Consolidated Financial Statements for additional informationrelated to these adjustments.

Other Factors.

• Operating revenues increased $2.0 billion, or 11%, in 2006 as compared to 2005 and by $2.9 billion,or 18%, in 2006 as compared to 2004. Revenues increased in 2006 and 2005 largely due topassenger revenue growth from United’s improved worldwide airline network performance and amore healthy revenue environment for United and the airline industry, which was significantlyaided by constrained industry capacity growth during these periods. However, United’s passengerrevenue growth rate has slowed in the latter part of 2006, with the 2006 fourth quarter operating

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revenues increasing 5% over the same quarter in 2005, as compared to a growth rate of 10% in thefourth quarter of 2005 over the same quarter in 2004. Fourth quarter revenues in 2006 were alsonegatively impacted by severe winter storms in Denver and Chicago, as discussed below. Theserevenues were also adversely affected by Mileage Plus accounting in 2006 as discussed above.

• United Express contributed $77 million to operating income in 2006 as compared to negativecontributions to operating results of $317 million in 2005 and $494 million in 2004. Thisimprovement is due to an improved regional operations cost structure resulting from thebankruptcy reorganization, network optimization similar to that achieved for the mainlineoperation, and the replacement of some 50-seat regional jets with 70-seat regional jets providingboth first class and Economy Plus service, among other factors.

• Mainline fuel costs have significantly trended upward since 2004, increasing by $792 millionbetween 2005 and 2006, and by $1.9 billion between 2004 and 2006. These increases are primarilydue to significant increases in market prices for jet fuel. The Company’s average cost per gallon forjet fuel, including taxes and hedge impacts, increased from approximately $1.25 in 2004, to $1.79 in2005, and to $2.11 in 2006. Similar increases were experienced in the average cost per gallon of jetfuel for United Express between periods, which is classified as Regional affiliates expense in theStatements of Consolidated Operations.

• Aircraft maintenance materials and outside repairs expense increased $128 million, or 15%, in 2006as compared to 2005, and by $262 million, or 35%, in 2006 as compared to 2004. As furtherdiscussed in the “Results of Operations” section below, these increases are due to several factors,including higher volumes of outsourced maintenance, increased rates under certain long-termmaintenance contracts and aging engines within United’s fleet.

• Interest expense increased $288 million in 2006 as compared to 2005, and by $321 million ascompared to 2004, primarily due to increased debt outstanding of approximately $1.4 billion as aresult of the Company’s new capital structure resulting from its emergence from bankruptcy onFebruary 1, 2006 and the fresh-start reporting adjustments discussed above. The increased interestexpense was partially offset by increased interest income of $211 million in 2006, as compared to2005. The Predecessor Company included $6 million and $60 million of interest income inreorganization items, net in accordance with SOP 90-7, for January 2006 and calendar-year 2005,respectively.

• The January 2006 reorganization income of approximately $22.9 billion primarily relates to thedischarge of liabilities and other fresh-start adjustments recorded in connection with the Company’simplementation of the Plan of Reorganization preparatory to its emergence from bankruptcy. In2005, the reorganization charges of approximately $20.6 billion were primarily for pension,employee-related, and aircraft claim charges of $8.9 billion, $6.5 billion and $3.0 billion,respectively. For additional information, see Note 1, “Voluntary Reorganization UnderChapter 11—Financial Statement Presentation,” in the Notes to Consolidated Financial Statements.

Liquidity. As of December 31, 2006, the Company had total cash, including restricted cash and short-term investments, of $5.0 billion. The Company’s strong cash position resulted from its recapitalizationupon emergence from bankruptcy, together with strong operating cash flows of $1.6 billion in 2006, ascompared to $1.1 billion in 2005 and $0.1 billion in 2004.

As noted above, in February 2007, the Company reduced its cash by approximately $1.0 billion to alevel that it believes is more optimal for its capital structure. The cash was used to prepay a portion of theCompany’s Credit Facility, which accordingly reduced debt by $972 million. As part of this transaction, theCompany entered into the Amended Credit Facility consisting of an amended and restated revolvingcredit, term loan and guaranty agreement of $2.1 billion.

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The Company has significant contractual cash payment obligations associated with debt, aircraftleases and aircraft purchase commitments, among others. See the “Liquidity and Capital Resources”section, below, for further information related to the Amended Credit Facility and the Company’scontractual obligations.

Contingencies. During the course of its Chapter 11 proceedings, the Company successfully reachedsettlements with most of its creditors and resolved most pending claims against the Debtors. The followingdiscussion provides a summary of the material matters yet to be resolved in the Bankruptcy Court, as wellas other contingencies. For further information on these matters, see Note 1, “Voluntary ReorganizationUnder Chapter 11 - Bankruptcy Considerations” and Note 15, “Commitments, Contingent Liabilities andUncertainties,” in the Notes to Consolidated Financial Statements.

Municipal Bond Obligations. The Company is a party to numerous long-term agreements to leasecertain airport and maintenance facilities that are financed through tax-exempt municipal bonds issued byvarious local municipalities to build or improve airport and maintenance facilities. As a result of theCompany’s bankruptcy filing, United was not permitted to make payments on unsecured pre-petition debt.The Company had been advised that these municipal bonds may have been unsecured (or in certaininstances, partially secured) pre-petition debt. Therefore, through the bankruptcy process, the Companyeither settled or rejected certain pre-petition debt associated with the municipal bonds. In 2006, certain ofthe Company’s municipal bond obligations relating to JFK, LAX and SFO have been conclusivelyadjudicated through the Bankruptcy Court as financings and not true leases, while the bonds relating toDenver International Airport (“DEN”) have been conclusively adjudicated as a true lease. The Companyhas guaranteed $261 million of the DEN bonds as discussed in Capital Commitments and Off-Balance SheetArrangements below. There remains pending litigation to determine the value of the security interests, ifany, that the bondholders at LAX and SFO have in the underlying UAL leaseholds.

Pension Benefit Terminations. In June 2006, the District Court entered an order approving thetermination of the United Airlines Pilot Defined Benefit Pension Plan (“Pilot Plan”). ALPA, UnitedRetired Pilots Benefit Protection Association (“URPBPA”) and the PBGC each filed appeals with theCourt of Appeals. On October 25, 2006, the Court of Appeals affirmed the District Court’s orderapproving the termination of the Pilot Plan effective December 30, 2004. Both ALPA and URPBPA havefiled petitions for writ of certiorari from the Supreme Court. The Supreme Court has yet to rule on eitherpetition. If the termination order is ultimately reversed by the Supreme Court and it results in the reversalof the termination of one or more of the Company’s previously defined benefit pension plans, it could havea materially adverse effect on the Company’s results of operations and financial condition.

There is also a dispute with respect to the continuing obligation of United to pay non-qualifiedpension benefits to retired pilots pending settlement of the involuntary termination proceeding. OnOctober 6, 2005, the Bankruptcy Court ruled that the Company was obligated to make payment of all non-qualified pension benefits for October 2005. During the first quarter of 2006, the District Court dismissedthe Company’s appeal of the Bankruptcy Court’s October 6, 2005 order in light of its earlier decisionreversing the Bankruptcy Court’s termination order. On October 25, 2006, the Court of Appeals reversedthe District Court’s order dismissing for lack of ripeness the Company’s appeal of the Bankruptcy Court’sOctober 6, 2005 order and remanded the case with instructions to reverse the Bankruptcy Court’s ordercompelling payment of non-qualified benefits for October 2005. On November 6, 2006, ALPA filed apetition for rehearing on the Court of Appeals reversal of the October 6, 2005 order. Both ALPA andURPBPA filed petitions for writ of certiorari from the Supreme Court on this issue. The Supreme Courthas yet to rule on either petition.

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In March 2006, the Bankruptcy Court ruled that the Company was obligated to make payment of allpilot non-qualified pension benefits for the months of November and December 2005 and January 2006.The Bankruptcy Court also ruled that the Company’s obligation to pay pilot non-qualified pension benefitsceased as of January 31, 2006. The Company filed a notice of appeal of the Bankruptcy Court’s ruling tothe District Court. URPBPA and ALPA also filed notices of appeal with respect to the Bankruptcy Court’sorder, which were subsequently consolidated with the Company’s appeal. United agreed with URPBPAand ALPA to pay into an escrow account the disputed non-qualified pension benefits for the months ofNovember and December 2005 and January 2006, an aggregate amount totaling approximately $17 million.The District Court affirmed the Bankruptcy Court’s ruling in September 2006. The Company filed a noticeof appeal of the District Court’s ruling to the Court of Appeals. URPBPA and ALPA also appealed theDistrict Court’s decision. The Company subsequently filed a motion to consolidate its appeal from theBankruptcy Court’s October 2005 non-qualified benefits order with the three appeals from the BankruptcyCourt’s March 2006 non-qualified benefits order. The Court of Appeals denied the Company’s motion, butissued an order staying briefing on the March 2006 non-qualified benefits order until further order of theCourt of Appeals. In light of the Court of Appeals’ October 25, 2006 decision described above, theCompany is reasonably optimistic of a successful outcome of its appeal in this matter, although there canbe no assurances that the ultimate outcome of this appeal will be favorable to the Company.

Legal and Environmental. UAL has certain contingencies resulting from litigation and claims(including environmental issues) incident to the ordinary course of business. Management believes, afterconsidering a number of factors, including (but not limited to) the views of legal counsel, the nature ofcontingencies to which the Company is subject and prior experience, that the ultimate disposition of thesecontingencies will not materially affect the Company’s consolidated financial position or results ofoperations. When appropriate, the Company accrues for these matters based on its assessments of thelikely outcomes of their eventual disposition. The amounts of these liabilities could increase or decrease inthe near term, based on revisions to estimates relating to the various claims.

New regulations surrounding the emission of greenhouse gases (such as carbon dioxide) are beingconsidered for promulgation both internationally and within the United States. The Company will becarefully evaluating the potential impact of such proposed regulations.

The Company anticipates that if ultimately found liable, its damages from claims arising from theevents of September 11, 2001, could be significant; however, the Company believes that, under the AirTransportation Safety and System Stabilization Act of 2001, its liability will be limited to its insurancecoverage.

Results of Operations

As described in the “Overview” section above, presentation of the combined twelve month period of2006 is a non-GAAP measure; however, management believes it is useful for comparison with the full yearsof 2005 and 2004.

The air travel business is subject to seasonal fluctuations. The Company’s operations can be adverselyimpacted by severe weather and its first and fourth quarter results normally reflect lower travel demand.Historically, because of these seasonal factors, results of operations are better in the second and thirdquarters.

Earnings from operations increased $666 million to $447 million in 2006 as compared to a loss fromoperations of $219 million in 2005. Excluding reorganization items, the net loss was $58 million in 2006which represents an improvement of $517 million over the net loss in 2005 of $575 million. Theseimprovements are due to the net impact of the items discussed below, among other factors. See Note 1,“Voluntary Reorganization Under Chapter 11—Financial Statement Presentation,” in the Notes toConsolidated Financial Statements for further information on reorganization items.

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Operating Revenues.

2006 Compared to 2005

The following table illustrates the year-over-year dollar and percentage changes in major categories ofoperating revenues.

Predecessor Successor Combined PredecessorPeriod fromJanuary 1 toJanuary 31,

Period fromFebruary 1

to December 31,

PeriodEnded

December 31,

YearEnded

December 31, $ %(Dollars in millions) 2006 2006 2006(a) 2005 Change ChangeOperating revenues:

Passenger—United Airlines. . . . . $1,074 $13,293 $14,367 $12,914 $1,453 11Passenger—Regional Affiliates . . 204 2,697 2,901 2,429 472 19Cargo . . . . . . . . . . . . . . . . . . . . . . . . 56 694 750 729 21 3Other operating revenues. . . . . . . 124 1,198 1,322 1,307 15 1

$1,458 $17,882 $19,340 $17,379 $1,961 11

(a) The combined 2006 period includes the results for one month ended January 31, 2006 (Predecessor Company) and elevenmonths ended December 31, 2006 (Successor Company).

Strong demand, industry capacity restraint, yield improvements, United’s resource optimizationinitiatives, and ongoing airline network optimization all contributed to a $2.0 billion increase in totaloperating revenue to $19.3 billion in 2006. The 11% mainline passenger revenue increase was due to bothincreased traffic and higher average ticket prices; United reported a 3% increase in mainline traffic on a2% increase in capacity and an 8% increase in yield. Severe winter storms in December 2006 at theChicago and Denver hubs, which resulted in the cancellation of approximately 3,900 United and UnitedExpress flights at these locations, had the estimated impact of reducing revenue by $40 million andreducing total expenses by $11 million. As discussed in “Critical Accounting Policies,” below, the Companychanged the accounting for its frequent flyer obligation to a deferred revenue model upon its emergencefrom bankruptcy which negatively impacted revenues by $158 million. This resulted in increased deferredrevenue due to a net increase in miles earned by Mileage Plus customers that will be redeemed in futureyears.

The 19% increase in regional affiliate revenues was also due to traffic and yield improvements asindicated in the table below.

The increase in cargo revenue was primarily due to improved yield, which was partially due to higherfuel surcharges between periods.

The table below presents selected passenger revenues and operating data by geographic region andthe Company’s mainline and United Express segments expressed as period-to-period changes:

2006North

America Pacific Atlantic Latin MainlineUnited

Express ConsolidatedIncrease (decrease) from 2005(a):Passenger revenues (in millions). . . . . . . . . $ 1,022 $ 234 $ 118 $ 79 $ 1,453 $ 472 $ 1,925Passenger revenues . . . . . . . . . . . . . . . . . . . 13% 9% 6% 19% 11% 19% 13%ASMs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4% —% (2)% 9% 2% 9% 3%RPMs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4% 1% (2)% 13% 3% 13% 4%Load factor (percent) . . . . . . . . . . . . . . . . . 0.3 pts 1.4 pts 0.7 pts 2.6 pts 0.7 pts 2.7 pts 0.8 ptsYield(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 9% 8% 9% 6% 8% 6% 9%

(a) The combined 2006 period includes the results for one month ended January 31, 2006 (Predecessor Company) and elevenmonths ended December 31, 2006 (Successor Company).

(b) Yields exclude charter revenue and revenue passenger miles.

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2005 Compared to 2004

The following table illustrates the year-over-year dollar and percentage changes in major categories ofoperating revenues.

(Dollars in millions) 2005 2004$

Change%

ChangeOperating revenues:

Passenger—United Airlines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,914 $12,542 $372 3Passenger—Regional Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,429 1,931 498 26Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 729 704 25 4Other operating revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,307 1,214 93 8

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,379 $16,391 $988 6

The table below presents selected passenger revenues and operating data by geographic region andthe Company’s mainline and United Express segments expressed as period-to-period changes:

2005North

America Pacific Atlantic Latin MainlineUnitedExpress Consolidated

Increase (decrease) from 2004:Passenger revenues (in millions). . . . . . . . $ (153) $ 364 $ 101 $ 60 $ 372 $ 498 $ 870Passenger revenues . . . . . . . . . . . . . . . . . . (2)% 16% 6% 16% 3% 26% 6%ASMs . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10)% 13% 1% 16% (3)% 21% (2)%RPMs . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6)% 12% 1% 16% (1)% 23% 1%Load factor . . . . . . . . . . . . . . . . . . . . . . . . 3.7 pts (0.9) pts 0.1 pts 0.1 pts 2.2 pts 1.0 pts 2.0 ptsYield(a). . . . . . . . . . . . . . . . . . . . . . . . . . . 5% 4% 7% (2)% 4% 3% 5%

(a) Yields exclude charter revenue and revenue passenger miles.

Consolidated operating revenues increased $988 million, or 6%, in 2005 as compared to 2004 andmainline RASM increased 7% from 9.95 cents to 10.66 cents. Mainline passenger revenues increased$372 million, or 3%, due to a 4% increase in yield slightly offset by a decline in RPMs of 1%. ASMsdecreased 3%; however, passenger load factor increased 2.2 points to 81.4%.

Passenger revenues—Regional Affiliates increased $498 million, or 26%, in 2005 as compared to 2004mainly due to increased volume of United Express regional carrier flying. Cargo revenues increased$25 million, or 4%, in 2005 as compared to 2004 due to a 1% increase in cargo ton miles combined with a2% increase in cargo yield. Other operating revenues increased $93 million, or 8%, primarily due toincreases in third-party maintenance revenues and ULS revenues, partially offset by a decrease in UnitedAirlines Fuel Corporation (“UAFC”) fuel sales to third parties.

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Operating Expenses.

2006 Compared to 2005

The table below includes the year-over-year dollar and percentage changes in operating expenses.Significant fluctuations are discussed below.

Predecessor Successor Combined Predecessor

(Dollars in millions)

Period fromJanuary 1 toJanuary 31,

2006

Period fromFebruary 1 toDecember 31,

2006

PeriodEnded

December 31,2006(a)

YearEnded

December 31,2005

$Change

%Change

Operating expenses:Aircraft fuel. . . . . . . . . . . . . . . . . . . . $ 362 $ 4,462 $ 4,824 $ 4,032 $ 792 20Salaries and related costs . . . . . . . . 358 3,909 4,267 4,027 240 6Regional affiliates . . . . . . . . . . . . . . 228 2,596 2,824 2,746 78 3Purchased services . . . . . . . . . . . . . . 134 1,595 1,729 1,524 205 14Aircraft maintenance materials

and outside repairs . . . . . . . . . . . 80 929 1,009 881 128 15Depreciation and amortization . . . 68 820 888 856 32 4Landing fees and other rent . . . . . . 75 801 876 915 (39) (4)Cost of third party sales . . . . . . . . . 65 614 679 685 (6) (1)Aircraft rent . . . . . . . . . . . . . . . . . . . 30 385 415 402 13 3Commissions. . . . . . . . . . . . . . . . . . . 24 291 315 305 10 3Special operating items (Note 19). — (36) (36) 18 (54) —Other operating expenses . . . . . . . . 86 1,017 1,103 1,207 (104) (9)

$1,510 $17,383 $18,893 $17,598 $1,295 7

(a) The combined period includes the results for one month ended January 31, 2006 (Predecessor Company) andeleven months ended December 31, 2006 (Successor Company).

In 2006, United implemented a resource optimization initiative that increased the number of mainlineASMs by 1% and United Express ASMs by 3%, for a consolidated ASM impact of 2%, without the use ofadditional aircraft. In addition to generating increased revenue, this contributed to additional variableexpenses such as fuel, salaries, and other expense items.

Higher fuel costs have had a significantly adverse effect on the Company’s operating expenses in 2006as compared to 2005. In 2006, mainline aircraft fuel expense increased 20% due to an increase in averagemainline fuel cost from $1.79 per gallon in 2005 to $2.11 per gallon in 2006, while fuel consumptionincreased 2% on a similar increase in mainline capacity. The Company recognized a net fuel hedge loss of$26 million in aircraft fuel expense in 2006, which is included in the $2.11 per gallon average cost, whereasin 2005 most fuel hedging gains and losses were recorded in non-operating income and expense. In 2005,the Company recorded $40 million of fuel hedging gains in non-operating income, as discussed below.

Salaries and related costs increased $240 million, or 6%, in 2006 as compared to the prior year. In2006 the Company recorded $159 million of expense, representing 4% of the increase in salaries andrelated costs, for the Successor Company’s share-based compensation plans because of the adoption ofStatement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment,” effectiveJanuary 1, 2006. In addition, the Company incurred an additional $26 million related to employeeperformance incentive programs in 2006 as compared to 2005. The Company also recorded $64 million inhigher postretirement expenses and $35 million in higher medical and dental expenses in 2006 than in2005. Salaries also increased due to merit increases awarded to employees in 2006, which were infrequentthroughout bankruptcy. These cost increases were partially offset by a 6% year-over-year improvement in

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43

labor productivity resulting from the Company’s continuous improvement efforts, together with selectiveoutsourcing of certain non-core functions. In 2006, the Company achieved its goal to reduce 1,000management and administrative positions.

The Company’s most significant regional affiliate expenses are capacity payments to the regionalcarriers and fuel expense. Fuel accounted for 30% of the Company’s regional affiliate expense in 2006, ascompared to 26% in 2005. Fuel cost increased due to increased market prices for jet fuel, as discussedabove, and increased fuel consumption from higher capacity. The Company’s regional affiliate expenseincreased only 3% despite a 9% increase in capacity due to the benefits of restructured lower-cost regionalcarrier capacity agreements in 2006 along with regional carrier network optimization and the replacementof some 50-seat regional jets with 70-seat regional jets. The 3% increase in regional affiliates expenseincludes an 18% increase in fuel costs. See Note 2(i), “Summary of Significant Accounting Policies—United Express,” in the Notes to Consolidated Financial Statements for further discussion of the Regionalaffiliates expense.

Purchased services increased $205 million, or 14%, in 2006, as compared to 2005, primarily due to anincrease of approximately $120 million in outsourcing costs for various non-core work activities; a$31 million increase in certain professional fees, which were classified as reorganization expenses by thePredecessor Company; and a $24 million increase in credit card fees due to higher passenger revenues.The offsetting benefits of higher outsourcing costs are reflected in a 4% reduction in manpower associatedwith the 6% labor productivity improvement noted for salaries and related costs.

In 2006, aircraft maintenance materials and outside repairs expense increased $128 million, or 15%,from 2005 primarily due to engine-related maintenance rate increases as well as increased volume.

As discussed in Note 1, “Voluntary Reorganization Under Chapter 11—Fresh-Start Reporting,” inthe Notes to Consolidated Financial Statements, the Company revalued its assets and liabilities to estimatedfair values. In 2006, amortization expense increased $162 million due to the recognition of $453 million ofadditional definite-lived intangible assets; however, this increase was offset by decreased depreciationexpense from fresh-start reporting adjustments that significantly reduced depreciable tangible asset bookvalues to fair value. The impact of the decrease in tangible asset valuation was significant as depreciationand amortization only increased $32 million despite the $162 million increase in intangible assetamortization and incremental depreciation on post-emergence property additions.

Other operating expense decreased $104 million in 2006, as compared to 2005. The adoption of fresh-start reporting, which included the revaluation of the Company’s frequent flyer obligation to estimated fairvalue and the change in accounting policy to a deferred revenue model for the Successor Companyreduced other expense by $27 million. For periods on or after February 1, 2006, adjustments to thefrequent flyer obligation are recorded to passenger and other operating revenues, whereas periodicadjustments under the Predecessor Company’s incremental cost basis were recognized in both operatingrevenues and other operating expense. See “Critical Accounting Policies,” below, for further details.Various cost savings initiatives also reduced the Company’s costs in 2006 as compared to 2005.

In 2006, the Company recognized a net benefit of approximately $36 million to operating expenseresulting from the resolution of preconfirmation contingencies for the estimated liability for SFO and LAXmunicipal bond obligations, and favorable adjustments to preconfirmation contingencies related to thepilots non-qualified pension plan. In 2005, the Company recognized a charge of $18 million for aircraftimpairments related to the planned accelerated retirement of certain aircraft. See Note 19, “SpecialItems,” in the Notes to Consolidated Financial Statements for further information.

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2005 Compared to 2004

The following table presents the year-over-year dollar and percentage changes in operating expensesfor the Predecessor Company in 2005 as compared to 2004.

(Dollars in millions) 2005 2004$

Change%

ChangeOperating expenses:

Aircraft fuel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,032 $ 2,943 $1,089 37Salaries and related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,027 5,006 (979) (20)Regional affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,746 2,425 321 13Purchased services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,524 1,462 62 4Aircraft maintenance materials and outside repairs . . . . . . . . . . 915 964 (49) (5)Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 881 747 134 18Landing fees and other rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 856 874 (18) (2)Cost of third party sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 685 709 (24) (3)Aircraft rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402 533 (131) (25)Commissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305 305 — —Special operating items (Note 19). . . . . . . . . . . . . . . . . . . . . . . . . . 18 — 18 —Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,207 1,277 (70) (5)

$17,598 $17,245 $ 353 2

Overall, operating expense increased only 2% in 2005 from 2004. The significant changes from 2004 to2005 included:

• A $1.1 billion, or 37%, increase in aircraft fuel expense was primarily due to a 43% increase in theaverage cost of fuel (including tax and hedge impact), partially offset by a 4% decrease inconsumption.

• Salaries and related costs decreased by $1.0 billion, or 20%, primarily due to cost savings associatedwith lower salaries and benefits as well as lower full-time equivalent employees. The decrease insalaries and related costs was driven by wage and benefit concessions resulting from negotiationswith employees and productivity improvements.

• Regional affiliates increased $321 million primarily as a result of increased fuel costs and volumesof United Express regional carrier flying, partially offset by new and amended contract savings.

• A $134 million increase in aircraft maintenance materials and outside repairs resulted primarilyfrom higher levels of purchased maintenance activity. This increase was partially offset by certainproductivity and labor rate improvements, the effects of which are reflected in salaries and relatedcosts.

• A $131 million decrease in aircraft rent was due to the restructuring of aircraft lease obligations andfleet reductions.

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Other income (expense).

2006 Compared to 2005

The following table illustrates the year-over-year dollar and percentage changes in consolidated otherincome (expense).

Predecessor Successor Combined PredecessorPeriod fromJanuary 1 toJanuary 31,

Period fromFebruary 1

to December 31,

PeriodEnded

December 31,

YearEnded

December 31, $ %(Dollars in millions) 2006 2006 2006(a) 2005 Change ChangeOperating income (expense):

Interest expense . . . . . . . . . . . . . $(42) $(728) $(770) $(482) $(288) (60)Interest income. . . . . . . . . . . . . . 6 243 249 38 211 555Interest capitalized. . . . . . . . . . . — 15 15 (3) 18 —Miscellaneous, net . . . . . . . . . . . — 14 14 87 (73) (84)

$(36) $(456) $(492) $(360) $(132) (37)

The Company incurred a $288 million increase in interest expense, which was partly due to the higheroutstanding principal balance of the Credit Facility for the Successor Company, as compared to the lowerDIP Financing balance for the Predecessor Company. Interest expense in 2006 was also unfavorablyimpacted by the associated amortization of various discounts which were recorded on debt instruments andcapital leases to record these obligations at fair value upon the adoption of fresh-start reporting. Interestincome increased $211 million year-over-year, reflecting a higher cash balance in 2006, as well as higherrates of return on certain investments. Interest income also increased due to the classification of mostinterest income in 2005 as reorganization expense in accordance with SOP 90-7. In 2005, the Companyrecorded $40 million of fuel hedge gains which did not qualify for hedge accounting in non-operatingincome, while in 2006 the $26 million net realized and unrealized loss from economic fuel hedges wasrecognized in aircraft fuel expense.

2005 Compared to 2004

The following table presents year-over-year dollar and percentage changes in consolidated otherincome (expense) for the Predecessor Company in 2005 as compared to 2004.

(Dollars in millions) 2005 2004$

Change%

ChangeOperating income (expense):

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(482) $(449) $ (33) (7)Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 25 13 52Interest capitalized. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) 1 (4) —Gain on sale of investments (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . — 158 (158) —Non-operating special items (Note 19) . . . . . . . . . . . . . . . . . . . . . . . — 5 (5) —Miscellaneous, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 (1) 88 —

$(360) $(261) $ (99) (38)

The Company reported a gain of $158 million from the sale of its investment in Orbitz in 2004. Inaddition, an increase in interest expense of $33 million, or 7%, in 2005 was due to higher interest and feesapplicable to the increased outstanding debt on the DIP Financing between periods. The Companyrecorded $40 million of fuel hedge gains in Miscellaneous, net in 2005 since they did not qualify for hedgeaccounting. There were no significant fuel hedge gains or losses included in Miscellaneous, net in 2004. In2005, the other significant item that was included in Miscellaneous, net was approximately $25 million of

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foreign currency transaction gains from the revaluation of certain foreign currency denominated debt andpension obligations.

See Note 1, “Voluntary Reorganization Under Chapter 11—Financial Statement Presentation,” in theNotes to Consolidated Financial Statements for further information on Reorganization items, net.

Liquidity and Capital Resources

Liquidity. UAL’s total of cash and cash equivalents, restricted cash and short-term investments was$5.0 billion and $2.8 billion at December 31, 2006 and 2005, respectively, including restricted cash of$847 million and $957 million, respectively. At December 31, 2006, the Company reclassified $972 millionof its long-term debt to current maturities to reflect its intent to prepay a portion of the Credit Facility. InFebruary 2007, the Company reduced its cash position by $972 million through the prepayment of part ofits Credit Facility debt. This debt prepayment reduced the Company’s cash balance to a level that itbelieves is more optimal. In addition, certain terms of the Credit Facility were amended in February 2007.The Amended Credit Facility consists of a $1.8 billion term loan and a $255 million revolving commitment.At the Company’s option, interest payments are based on either a base rate, as defined in the AmendedCredit Facility, or at LIBOR plus 2%. This applicable margin on LIBOR rate loans is a significantreduction of 1.75% from the Credit Facility. The Amended Credit Facility frees up a significant amount ofassets that had been pledged as collateral under the Credit Facility. See the “Capital Commitments andOff-Balance Sheet Arrangements” section, below, for information related to scheduled maturities on theAmended Credit Facility. In January 2007, the Company decided to terminate the interest rate swap thathad been used to hedge the future interest payments under the original Credit Facility term loan of$2.45 billion. In the first quarter of 2007, the Company expects to expense approximately $16 million ofdeferred financing costs related to the prepaid portion of the Credit Facility.

Restricted cash primarily represents cash collateral to secure workers’ compensation obligations,security deposits for airport leases and reserves with institutions that process United’s credit card ticketsales. Certain of the credit card processing arrangements are based on the aggregate then-outstandingbank card air traffic liability, the Company’s credit rating and its compliance with certain debt covenants.Credit rating downgrades or debt covenant noncompliance could materially increase the Company’sreserve requirements.

Cash Flows from Operating Activities.

2006 compared to 2005

The Company generated cash from operations of $1.6 billion in 2006 compared to $1.1 billion in 2005.The higher operating cash flow generated in 2006 was due to improved results of operations as discussedabove in the “Results of Operation” section, together with differences in the timing and amount ofworking capital items, and other smaller changes. As discussed in the “Fresh-Start Reporting” section,above, UAL’s 2006 net income includes significant non-cash items.

The Company does not have any significant defined benefit pension plan contribution requirements asmost of the Company-sponsored plans were replaced with defined contribution plans upon its emergencefrom bankruptcy. The Company contributed approximately $259 million and $11 million to its definedcontribution plans and non-U.S. pension plans, respectively, in the eleven months ended December 31,2006.

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2005 compared to 2004

For the year ended December 31, 2005, UAL generated cash from operations of $1.1 billion, a$980 million increase over cash generated from operations of $99 million in 2004. The higher operatingcash generated in 2005 was largely due to improved results of operations, together with increased advancedticket sales and differences in amounts and timing of other working capital changes.

The Company contributed $127 million towards its U.S. qualified defined benefit pension plans in2004, but made no such cash contributions in 2006 or 2005. The Company contributed $61 million and$75 million in 2005 and 2004, respectively, largely towards its non-U.S. pension plans and its U.S. non-qualified pension plans. Detailed information regarding the Company’s pension plans is included inNote 8, “Retirement and Postretirement Plans,” in the Notes to Consolidated Financial Statements.

Cash Flows from Investing Activities.

2006 Compared to 2005

Cash used by investing activities was $250 million in 2006 as compared to $291 million in 2005. Cashreleased from segregated funds after exit from bankruptcy in 2006 provided $200 million in cash proceeds,and the sale of the subsidiary MyPoints.com, Inc. in 2006 generated an additional $56 million in cashproceeds. Cash used for increases in short-term investments in 2006 was $235 million, as compared to$1 million provided from the sale of short-term investments in 2005. A reduction in restricted cashbalances provided $110 million of cash proceeds in 2006, as compared to cash used to increase restrictedcash of $80 million in 2005. Required restricted cash balances in 2006 have decreased slightly from 2005 asa result of the Company’s emergence from bankruptcy, among other factors.

In 2006, the Company did not reject or return any aircraft under Section 1110 of the BankruptcyCode, although the sale of nine non-operating B767-200 aircraft during this period provided $19 million incash proceeds from the disposition of property and equipment. The Company used $362 million in cash forthe acquisition of property and equipment in 2006, as compared to $470 million in 2005.

2005 Compared to 2004

Overall, cash used in investing activities of $291 million in 2005 was comparable to cash used of$296 million in 2004.

The Company sold ten B727, five B737 and seven B767 aircraft and rejected or returned to thefinanciers 30 B737 aircraft, ten B767 aircraft and one B747 aircraft under Section 1110 of the BankruptcyCode in 2005. The Company then reacquired eight of the previously-returned B767 aircraft, of which fourwere purchased by the Company from the Public Debt Group and subsequently sold to a third-party andsimultaneously leased back, and of which four were acquired directly by a third-party from the Public DebtGroup and subsequently leased to the Company. In addition, the Company, as part of its agreement withthe Public Debt Group, purchased six additional B767 aircraft from the Public Debt Group, which weresubsequently sold to and leased back from third parties.

During 2004, the Company received $218 million from the sales of its investments in Orbitz and AirCanada, and used $198 million to provide increased cash deposits classified as restricted, and $267 millionfor the acquisition of property and equipment.

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Cash Flows from Financing Activities.

2006 Compared to 2005

Cash generated through financing activities was $782 million in 2006 compared to cash used of$110 million in 2005. In 2006, the Company made principal payments under long-term debt and capitallease obligations totaling $2.1 billion, which included $1.2 billion for the repayment of the DIP Financing.

In 2006, the Company obtained access to up to $3.0 billion in secured exit financing which consisted ofa $2.45 billion term loan, a $350 million delayed draw term loan and a $200 million revolving credit line.On the Effective Date, $2.45 billion of the $2.8 billion term loan and the entire revolving credit line wasdrawn and used to repay the DIP Financing and to make other payments required upon exit frombankruptcy, as well as to provide ongoing liquidity to conduct post-reorganization operations.Subsequently, the Company repaid borrowings under the revolving credit line and accessed the remaining$350 million on the delayed draw term loan. For further details on the Credit Facility, see Note 11, “DebtObligations,” in the Notes to Consolidated Financial Statements. At December 31, 2006, the Company had atotal of $2.8 billion of debt and $63 million in letters of credit outstanding under the Credit Facility.

During 2006, the Company secured control of 14 aircraft that were included in the 1997-1 EETCtransaction by remitting $281 million to the 1997-1 EETC trustee on behalf of the holders of the TrancheA certificates. The Company subsequently refinanced the 14 aircraft on March 28, 2006 with the$350 million delayed draw term loan provided under the Credit Facility. The 14 aircraft are comprised offour B737 aircraft, two B747 aircraft, four B777 aircraft and four A320 aircraft.

Significant 2006 non-cash financing and investment activities included the conversion of six B757aircraft and one B747 aircraft from leased to owned status resulting in additional aircraft assets and debtobligations of $242 million. The Company completed definitive documentation for this transaction inJuly 2006, as discussed in Note 1—“Voluntary Reorganization Under Chapter 11—BankruptcyConsiderations,” in the Notes to Consolidated Financial Statements. In addition, in the first quarter of 2006the Successor Company completed a transaction that converted certain mortgaged aircraft to capital leasesfor $137 million. See Note 17, “Statement of Consolidated Cash Flows—Supplemental Disclosures,” in theNotes to Consolidated Financial Statements.

2005 Compared to 2004

Cash used in financing activities was $110 million in 2005 compared to $72 million in 2004. During2005, the Company made principal payments under long-term debt, DIP Financing, and capital leaseobligations of $285 million, $16 million, and $94 million, respectively. The total cash used for thesepayments was $395 million in 2005, as compared to total cash used of $737 million for principal paymentsunder debt and capital lease obligations in 2004. In 2005 as compared to 2004, a decrease of $203 million inproceeds from the DIP financing offset the significant decrease in principal payments.

During 2005, the Company made $16 million in principal payments on the DIP Financing. In addition,the Company renegotiated and expanded its DIP Financing facility, allowing it to borrow an additional$310 million during 2005. The amended DIP Financing facility also permitted the Company to makecapital expenditures not exceeding $750 million towards aircraft acquisitions, with cash expenditures forsuch acquisitions not to exceed $300 million. This capital expenditures basket was created primarily toallow the Company to purchase certain aircraft that were controlled by the Public Debt Group, all of whichwere already in its fleet or had been in its fleet in the recent past. The Company raised $253 million inconnection with the subsequent long-term financing of ten of the B767 aircraft acquired from the PublicDebt Group.

Capital Commitments and Off-Balance Sheet Arrangements. UAL’s business is very capital intensive,requiring significant amounts of capital to fund the acquisition of assets, particularly aircraft. In the past,

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the Company has funded the acquisition of aircraft through outright purchase, by issuing debt, by enteringinto capital or operating leases, or through vendor financings. The Company also often enters into long-term lease commitments with airports to ensure access to terminal, cargo, maintenance and other requiredfacilities.

Following is a summary of the Company’s material contractual obligations as of December 31, 2006:

One year Years Years After(In millions) or less 2 and 3 4 and 5 5 years TotalLong-term debt, including current portion(a). . . . . . . . $ 715 $1,443 $1,777 $ 5,452 $ 9,387Interest payments(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669 1,190 968 1,324 4,151Capital lease obligations

Mainline(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240 470 586 679 1,975United Express(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 29 25 19 88

Aircraft operating lease obligationsMainline. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358 668 610 1,239 2,875United Express(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413 818 738 1,117 3,086

Other operating lease obligations . . . . . . . . . . . . . . . . . . 507 951 859 3,464 5,781Postretirement obligations(e) . . . . . . . . . . . . . . . . . . . . . 161 321 312 709 1,503Capital spending commitments(f) . . . . . . . . . . . . . . . . . . 128 76 691 1,577 2,472

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,206 $5,966 $6,566 $15,580 $31,318

(a) Amounts represent contractual amounts due (the one year or less column does not reflect the $972 millionprepayment of the Credit Facility in February 2007, as this was not a contractual obligation at December 31,2006).

(b) Future interest payments on variable rate debt are estimated using estimated future variable rates based on ayield curve, and have not been adjusted for the February 2007 $972 million prepayment of the Credit Facility.

(c) Includes non-aircraft capital lease payments of $4 million in each of the years 2007 through 2011. United Expresspayments are all for aircraft.

(d) Amounts represent lease payments that are made by United under capacity agreements with the regional carrierswho operate these aircraft on United’s behalf.

(e) Amounts represent postretirement benefit payments, net of subsidy receipts, through 2016. Benefit paymentsapproximate plan contributions as plans are substantially unfunded. Not included in the table above arecontributions related to the Company’s foreign pension plans. The Company does not have any significantcontributions required by government regulations. The Company’s expected pension plan contributions for 2007are $14 million.

(f) Amounts are principally for aircraft and exclude advance payments. The Company has the right to cancel itscommitments for the purchase of A319 and A320 aircraft; however, such action could cause the forfeiture of $91million of advance payments.

In February 2007, the Company prepaid $972 million on the Credit Facility and amended certain of itsterms. This prepayment increases (decreases) the Company’s expected debt payments in the table above by$972 million in 2007, $(10) million in each of the years 2008 through 2011 and $(932) million thereafter.The prepayment and amendment of interest rate terms increases (decreases) the Company’s total expectedinterest payments, as reported in the table above, by $(82) million in one year or less, $(252) million incombined years two and three, $(243) million in combined years four and five and $703 million after fiveyears. Interest payments in the after five years period are higher because the Amended Credit Facilitymatures in 2014 while the Credit Facility would have matured in 2012 based on its original terms.

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See Note 2(i), “Summary of Significant Accounting Policies—United Express,” Note 8, “Retirementand Postretirement Plans,” Note 11, “Debt Obligations,” and Note 16, “Lease Obligations,” in the Notes toConsolidated Financial Statements for additional discussion of these items.

Off-Balance Sheet Arrangements. An off-balance sheet arrangement is any transaction, agreement orother contractual arrangement involving an unconsolidated entity under which a company has (1) madeguarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under derivativeinstruments classified as equity or (4) any obligation arising out of a material variable interest in anunconsolidated entity that provides financing, liquidity, market risk or credit risk support to the company,or that engages in leasing, hedging or research and development arrangements with the company. TheCompany’s off-balance sheet arrangements include operating leases, which are summarized in thecontractual obligations table, above, and certain municipal bond obligations as discussed below.

Certain municipalities issued municipal bonds on behalf of United to finance the construction ofimprovements at airport-related facilities. The Company also leases facilities at airports where municipalbonds funded at least some of the construction of airport-related projects. At December 31, 2006, theCompany guaranteed interest and principal payments on $261 million in principal of such bonds that wereissued in 1992 and are due in 2032 unless the Company elects not to extend its lease in which case thebonds are due in 2023. The outstanding bonds and related guarantee are not recorded in the Company’sStatements of Consolidated Financial Position in accordance with GAAP. The related lease agreement isaccounted for as an operating lease, and the related rent expense is recorded on a straight-line basis. Theannual lease payments through 2023 and the final payment for the principal amount of the bonds areincluded in the operating lease payments in the contractual obligations table above. For further details, seeNote 1 “Voluntary Reorganization Under Chapter 11—Bankruptcy Considerations” and Note 15,“Commitments, Contingent Liabilities and Uncertainties—Guarantees and Off-Balance Sheet Financing,”in the Notes to Consolidated Financial Statements.

Fuel Consortia. The Company participates in numerous fuel consortia with other carriers at majorairports to reduce the costs of fuel distribution and storage. Interline agreements govern the rights andresponsibilities of the consortia members and provide for the allocation of the overall costs to operate theconsortia based on usage. The consortia (and in limited cases, the participating carriers) have entered intolong-term agreements to lease certain airport fuel storage and distribution facilities that are typicallyfinanced through tax-exempt bonds (either special facilities lease revenue bonds or general airport revenuebonds), issued by various local municipalities. In general, each consortium lease agreement requires theconsortium to make lease payments in amounts sufficient to pay the maturing principal and interestpayments on the bonds. As of December 31, 2006, approximately $484 million principal amount of suchbonds were secured by fuel facility leases at major hubs in which United participates, as to which Unitedand each of the signatory airlines has provided indirect guarantees of the debt. United’s exposure isapproximately $171 million principal amount of such bonds based on its recent consortia participation. TheCompany’s exposure could increase if the participation of other carriers decreases. The guarantees willexpire when the tax-exempt bonds are paid in full, which ranges from 2010 to 2028. The Company did notrecord a liability at the time these indirect guarantees were made.

Debt Covenants. The Company was in compliance with the Credit Facility covenants as ofDecember 31, 2006. As part of the amendment to the Credit Facility completed in February 2007, severalcovenants were amended to provide the Company more flexibility. The Amended Credit Facility containscovenants that will limit the ability of United and the Guarantors to, among other things, incur orguarantee additional indebtedness, create liens, pay dividends on or repurchase stock, make certain typesof investments, pay dividends or other payments from United’s direct or indirect subsidiaries, enter intotransactions with affiliates, sell assets or merge with other companies, modify corporate documents orchange lines of business. The Amended Credit Facility also requires compliance with certain financialcovenants. Failure to comply with the covenants could result in a default under the Amended Credit

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Facility unless the Company were to obtain a waiver of, or otherwise mitigate or cure, any such default.Additionally, the Amended Credit Facility contains a cross-default provision with respect to other creditarrangements that exceed $50 million. A payment default could result in a termination of the AmendedCredit Facility and a requirement to accelerate repayment of all outstanding facility borrowings. TheCompany believes that the combination of its existing cash and cash flows generated by operations will beadequate to satisfy its projected liquidity needs over the next twelve months. For further details about theAmended Credit Facility and the associated covenants, see Note 11, “Debt Obligations,” in the Notes toConsolidated Financial Statements.

Future Financing. Substantially all of the Company’s unencumbered assets were pledged to theCredit Facility as of December 31, 2006. The Amended Credit Facility allowed the Company to releasecertain assets with an estimated market value of approximately $2.5 billion from the Credit Facilitycollateral pool, which are now unencumbered. The Amended Credit Facility does not place any specificrestrictions on the Company’s ability to issue debt secured by these newly unencumbered assets. Inaddition, subject to the restrictions of its Amended Credit Facility, the Company could raise additionalcapital by issuing unsecured debt, equity or equity-like securities, monetizing or borrowing against certainassets or refinancing existing obligations to generate net cash proceeds. However, the availability andcapacity of these funding sources cannot be assured or predicted.

Credit Ratings. As part of its exit from bankruptcy, United and UAL received a corporate creditrating of B (outlook stable) from Standard & Poor’s and a corporate family rating of B2 (outlook stable)from Moody’s Investors Services. These credit ratings are below investment grade levels. Downgrades fromthese rating levels could restrict the availability and/or increase the cost of future financing for theCompany.

Other Information

Foreign Operations. The Company’s Statements of Consolidated Financial Position reflect materialamounts of intangible assets related to the Company’s Pacific and Latin American route authorities, andits hub at London’s Heathrow Airport. See Note 2(k), “Summary of Significant Accounting Policies—Intangibles,” in the Notes to Consolidated Financial Statements for further information. Because operatingauthorities in international markets are governed by bilateral aviation agreements between the U.S. andforeign countries, changes in U.S. or foreign government aviation policies can lead to the alteration ortermination of existing air service agreements that could adversely impact, and significantly impair, thevalue of our international route authorities. Significant changes in such policies could also have a materialimpact on the Company’s operating revenues and expenses and results of operations. See Item 1.Business—International Regulation for further information and Item 7A. Quantitative and QualitativeDisclosures above Market Risk for further information on the Company’s foreign currency risks associatedwith its foreign operations.

Critical Accounting Policies

Critical accounting policies are defined as those that are affected by significant judgments anduncertainties which potentially could result in materially different accounting under different assumptionsand conditions. The Company has prepared the accompanying financial statements in conformity withGAAP, which requires management to make estimates and assumptions that affect the reported amountsin the financial statements and accompanying notes. Actual results could differ from those estimates underdifferent assumptions or conditions. The Company has identified the following critical accounting policiesthat impact the preparation of these financial statements.

Passenger Revenue Recognition. The value of unused passenger tickets and miscellaneous chargeorders (“MCO’s”) is included in current liabilities as advance ticket sales. United records passenger ticketsales as operating revenues when the transportation is provided or when the ticket expires. Non-refundable

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tickets generally expire on the date of the intended flight, unless the date is extended by notification fromthe customer on or before the intended flight date. Fees charged in association with changes or extensionsto non-refundable tickets are recorded as passenger revenue at the time the fee is incurred. Change feesrelated to non-refundable tickets are considered a separate transaction from the air transportation becausethey represent a charge for the Company’s additional service to modify a previous reservation. Therefore,the pricing of the change fee and the initial customer reservation are separately determined and representdistinct earnings processes. Refundable tickets expire after one year. MCO’s are stored value documentsthat are either exchanged for a passenger ticket or refunded after issuance. United records an estimate ofMCO’s that will not be exchanged or refunded as revenue ratably over the validity period based onhistorical results. Due to complex industry pricing structures, refund and exchange policies, and interlineagreements with other airlines, certain amounts are recognized as revenue using estimates both as to thetiming of recognition and the amount of revenue to be recognized. These estimates are based on theevaluation of actual historical results.

Accounting for Long-Lived Assets. The Company has $11.5 billion in net book value of operatingproperty and equipment at December 31, 2006. In addition to the original cost of these assets, as adjustedby fresh-start reporting at February 1, 2006, their recorded value is impacted by a number of accountingpolicy elections, including the estimation of useful lives and residual values and, when necessary, therecognition of asset impairment charges.

Except for the adoption of fresh-start reporting at February 1, 2006, whereby the Companyremeasured long-lived assets at fair value, it is the Company’s policy to record assets acquired, includingaircraft, at acquisition cost. Depreciable life is determined through economic analysis, such as reviewingexisting fleet plans, obtaining appraisals and comparing estimated lives to other airlines that operatesimilar fleets. Older generation aircraft are assigned lives that are generally consistent with the experienceof United and the practice of other airlines. As aircraft technology has improved, useful life has increasedand the Company has generally estimated the lives of those aircraft to be 30 years. Residual values areestimated based on historical experience with regards to the sale of both aircraft and spare parts, and areestablished in conjunction with the estimated useful lives of the related fleets. Residual values are based oncurrent dollars when the aircraft are acquired and typically reflect asset values that have not reached theend of their physical life. Both depreciable lives and residual values are revised periodically to recognizechanges in the Company’s fleet plan and other relevant information. A one year increase in the averagedepreciable life of our aircraft would reduce annual depreciation expense by approximately $19 million.

In accordance with Statement of Financial Accounting Standards No. 144, “Accounting for theImpairment or Disposal of Long-Lived Assets,” the Company evaluates the carrying value of long-livedassets whenever events or changes in circumstances indicate that an impairment may exist. The Company’spolicy is to recognize an impairment charge when an asset’s carrying value exceeds its net undiscountedfuture cash flows and its fair market value. The amount of the charge is the difference between the asset’sbook value and fair market value (sometimes estimated using appraisals). More often, the Companyestimates the undiscounted future cash flows for its various aircraft with financial models used by theCompany to make fleet and scheduling decisions. These models utilize projections on passenger yield, fuelcosts, labor costs and other relevant factors, many of which require the exercise of significant judgment onthe part of management. Changes in these projections may expose the Company to future impairmentcharges by raising the threshold which future cash flows need to meet.

The Company recognized impairment charges on assets held-for-sale of $5 million in 2006 and$18 million for the early retirement of certain aircraft in 2005. See Note 2(l), “Summary of SignificantAccounting Policies—Measurement of Impairments” and Note 19, “Special Items,” in the Notes toConsolidated Financial Statements.

See Note 2(f), “Summary of Significant Accounting Policies—Operating Property and Equipment,” inthe Notes to Consolidated Financial Statements for additional information regarding United’s policies onaccounting for long-lived assets.

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Fresh-Start Reporting. In connection with its emergence from Chapter 11 protection as of February 1,2006, the Company adopted fresh-start reporting in accordance with SOP 90-7. Accordingly, UAL’s assets,liabilities and equity were valued at their respective fair values as of the Effective Date. The excessreorganization value over the fair value of net tangible and identifiable intangible assets and liabilities hasbeen reflected as goodwill in the accompanying Statements of Consolidated Financial Position.

Fair values of assets and liabilities represent the Company’s best estimates based on independentappraisals and valuations and, where the foregoing are not available, industry data and trends and byreference to relevant market rates and transactions. Accordingly, the Company cannot provide assurancethat the estimates, assumptions, and values reflected in the asset and liability valuations will be realized,and actual results could vary materially from those estimates. In accordance with SFAS 141, thepreliminary measurement and allocation of fair value to assets and liabilities was subject to additionaladjustment within one year after emergence from bankruptcy to provide the Company time to complete itsvaluation of its assets and liabilities. See Note 1, “Voluntary Reorganization Under Chapter 11—Fresh-Start Reporting,” and Note 2(k), “Summary of Significant Accounting Policies—Intangibles” in the Notesto Consolidated Financial Statements for further details related to the fresh-start fair value adjustments.

To facilitate the calculation of the enterprise value of the Successor Company, a set of financialprojections were developed. Based on these financial projections, the equity value was estimated by theCompany using various valuation methods, including (i) a comparison of the Company and its projectedperformance to the market values of comparable companies, (ii) a review and analysis of several recenttransactions of companies in similar industries to the Company, and (iii) a calculation of the present valueof projected future cash flows using the Company’s financial projections.

The estimated enterprise value and corresponding equity value are highly dependent upon achievingthe future financial results set forth in the projections as well as the realization of certain otherassumptions that cannot be guaranteed. The estimated equity value of the Company was calculated to beapproximately $1.9 billion. The foregoing estimates and assumptions are inherently subject to significantuncertainties and contingencies beyond the reasonable control of the Company. Moreover, the marketvalue of the Company’s common stock may differ materially from the fresh-start equity valuation.

Frequent Flyer Accounting. In accordance with fresh-start reporting, the Company revalued itsfrequent flyer obligation to estimated fair value at the Effective Date, which resulted in a $2.4 billionincrease to the frequent flyer obligation. The Successor Company also has elected to change its accountingpolicy for its Mileage Plus frequent flyer program to a deferred revenue model. The Company believes thataccounting for frequent flyer miles using a deferred revenue model is preferable, as it establishes aconsistent valuation methodology for both miles earned by frequent flyers and miles sold to non-airlinebusiness partners.

Before the Effective Date, the Predecessor Company had used the historical industry practice ofaccounting for frequent flyer miles earned on United flights on an incremental cost basis as an accruedliability and as advertising expense, while miles sold to non-airline business partners were accounted for ona deferred revenue basis. As of the Effective Date, the deferred revenue value of all frequent flyer milesare measured using equivalent ticket value as described below, and all associated adjustments are made topassenger revenues.

The deferred revenue measurement method used to record fair value of the frequent flyer obligationon and after the Effective Date was to allocate an equivalent weighted-average ticket value to eachoutstanding mile, based upon projected redemption patterns for available award choices when such milesare consumed. Such value was estimated assuming redemptions on both United and other participatingcarriers in the Mileage Plus program, and by estimating the relative proportions of awards to be redeemedby class of service within broad geographic regions of the Company’s operations, including North America,Atlantic, Pacific and Latin America.

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Under the new method of accounting adopted for this program at the Effective Date, the Companyreduced operating revenue by approximately $158 million more in the eleven months ended December 31,2006 to account for the effects of the program as compared to the reduction in revenues that would havebeen recognized using the Predecessor Company’s accounting method. The Company’s new accountingpolicy does not continue the use of the former incremental cost method, which impacted revenues andadvertising expense under that prior policy. Assuming the use of the Predecessor Company’s accountingfor this program, for the eleven months ended December 31, 2006, the Company estimates that it wouldhave recorded approximately $27 million of additional advertising expense.

The estimation of the fair value of each award mile requires the use of several significant assumptions,for which significant management judgment is required. For example, management must estimate howmany miles are projected to be redeemed on United, versus on other airline partners. Since the equivalentticket value of miles redeemed on United and on other carriers can vary greatly, this assumption canmaterially affect the calculation of the weighted-average ticket value from period to period.

Management must also estimate the expected redemption patterns of Mileage Plus customers, whohave a number of different award choices when redeeming their miles, each of which can have materiallydifferent estimated fair values. Such choices include different classes of service (first, business and severalcoach award levels), as well as different flight itineraries, such as domestic and international routings, anddifferent itineraries within domestic and international regions of United’s and other participating carriers’flight networks. Customer redemption patterns may also be influenced by program changes, which occurfrom time to time and introduce new award choices, or make material changes to the terms of existingaward choices. Management must often estimate the probable impact of such program changes on futurecustomer behavior using limited data, which requires the use of significant judgment. Management useshistorical customer redemption patterns as the best single indicator of future redemption behavior inmaking its estimates, but changes in customer mileage redemption behavior to patterns which are notconsistent with historical behavior can result in material changes to deferred revenue balances, and torecognized revenue.

Management’s estimate of the expected breakage of miles as of the fresh-start date, and forrecognition of breakage post-emergence, also requires significant management judgment. For customeraccounts which are inactive for a period of 36 consecutive months, it has been United’s policy to cancel allmiles contained in those accounts at the end of the 36 month period of inactivity. In early 2007, theCompany announced that it is reducing the expiration period from 36 months to 18 months effectiveDecember 31, 2007. Under its deferred revenue accounting policy effective in 2006, the Companyrecognized revenue from breakage of miles by amortizing such estimated breakage over the 36 monthexpiration period. However, current and future changes to program rules, such as the recent change in theexpiration period, and program redemption opportunities can significantly alter customer behavior fromhistorical patterns with respect to inactive accounts. Such changes may result in material changes to thedeferred revenue balance, as well as recognized revenues from the program. A hypothetical 1% change inthe Company’s estimated breakage rate, estimated at 14% annually as of December 31, 2006, hasapproximately an $18 million effect on the liability.

At December 31, 2006, the Company’s outstanding number of miles was approximately 508.8 billion.The Company estimates that approximately 438.3 billion of these miles will ultimately be redeemed basedon assumptions as of December 31, 2006 and, accordingly, has recorded deferred revenue of $3.7 billion. Ahypothetical 1% change in the Company’s outstanding number of miles or the weighted-average ticketvalue has approximately a $42 million effect on the liability. These assumptions do not include the impactof reducing the expiration period from 36 months to 18 months.

Goodwill and Intangible Assets. In accordance with Statement of Financial Accounting StandardsNo. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), the Company applies a fair value-based

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impairment test to the book value of goodwill and indefinite-lived intangible assets on an annual basis and,if certain events or circumstances indicate that an impairment loss may have been incurred, on an interimbasis. An impairment charge could have a material adverse effect on the Company’s financial position andresults of operations in the period of recognition.

Upon the implementation of fresh-start reporting (see Note 1, “Voluntary Reorganization UnderChapter 11—Fresh-Start Reporting,” in the Notes to Consolidated Financial Statements) the Company’sassets, liabilities and equity were valued at their respective fair values. The excess of reorganization valueover the fair value of net tangible and identifiable intangible assets and liabilities has been reflected asgoodwill in the accompanying Statements of Consolidated Financial Position on the Effective Date. Asdiscussed in Note 9, “Segment Information,” in the Notes to Consolidated Financial Statements, the entiregoodwill amount of $2.7 billion at December 31, 2006 has been allocated to the mainline reportablesegment. In addition, the adoption of fresh-start reporting resulted in the recognition of $2.2 billion ofindefinite-lived intangible assets.

SFAS 142 requires that a two-step impairment test be performed on goodwill. In the first step, theCompany compares the fair value of the reportable segment to its carrying value. If the fair value of thereportable segment exceeds the carrying value of the net assets of the reportable segment, goodwill is notimpaired and the Company is not required to perform further testing. If the carrying value of the net assetsof the reportable segment exceeds the fair value of the reportable segment, then the Company mustperform the second step to determine the implied fair value of the goodwill and compare it to the carryingvalue of the goodwill. If the carrying value of goodwill exceeds its implied fair value, then the Companymust record an impairment charge equal to such difference.

The Company assessed the fair value of its reportable segments considering both the market andincome approaches. Under the market approach, the fair value of the reportable segment is based onquoted market prices and recent transaction values of peer companies. Under the income approach, thefair value of the reportable segment is based on the present value of estimated future cash flows. Theincome approach is dependent on a number of factors including estimates of future capacity, passengeryield, traffic, operating costs, appropriate discount rates and other relevant factors.

The Company performed its annual impairment test for its goodwill and other indefinite-livedintangible assets as of October 1, 2006. To estimate the fair value of indefinite-lived intangible assets theCompany used the market and income approaches, discussed above, and the cost method, which uses theconcept of replacement cost as an indicator of fair value. The Company did not identify any impairments inthese assets.

Other Postretirement Benefit Accounting. The Company accounts for other postretirement benefitsusing Statement of Financial Accounting Standards No. 106, “Employers’ Accounting for PostretirementBenefits Other than Pensions” (“SFAS 106”) and Statement of Financial Accounting Standards No. 158,“Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment ofFASB Statements No. 87, 88, 106 and 132(R)” (“SFAS 158”). For the year ended December 31, 2006, theCompany adopted SFAS 158, which requires the Company to recognize the difference between plan assetsand obligations, or the plan’s funded status, in its Statements of Consolidated Financial Position. Underthese accounting standards, other postretirement benefit expense is recognized on an accrual basis overemployees’ approximate service periods and is generally calculated independently of funding decisions orrequirements. The Company has not been required to pre-fund its current and future plan obligationsresulting in a significant net obligation, as discussed below.

The fair value of plan assets at December 31, 2006 was $54 million for the other postretirementbenefit plans. The benefit obligation was $2.1 billion for the other postretirement benefit plans atDecember 31, 2006. The difference between the plan assets and obligations has been recorded in theStatements of Consolidated Financial Position at December 31, 2006. Detailed information regarding the

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Company’s other postretirement plans, including key assumptions, is included in Note 8, “Retirement andPostretirement Plans,” in the Notes to Consolidated Financial Statements.

The following provides a summary of the methodology to determine the assumptions used in Note 8,“Retirement and Postretirement Plans,” in the Notes to Consolidated Financial Statements. The calculationof other postretirement benefit expense and obligations requires the use of a number of assumptions,including the assumed discount rate for measuring future payment obligations and the expected return onplan assets. The discount rates were based on the construction of theoretical bond portfolios, adjustedaccording to the timing of expected cash flows for the Company’s future postretirement obligations. Ayield curve was developed based on a subset of these bonds (those with yields between the 40th and 90thpercentiles). The projected cash flows were matched to this yield curve and a present value developed,which was then calibrated to develop a single equivalent discount rate.

The expected return on plan assets is based on an evaluation of the historical behavior of the broadfinancial markets and the Company’s investment portfolio, taking into consideration input from the plan’sinvestment consultant and actuary regarding expected long-term market conditions and investmentmanagement performance. The Company believes that the long-term asset allocation on average willapproximate the targeted allocation and it regularly reviews the actual asset allocation to periodicallyrebalance the investments to the targeted allocation when appropriate. Other postretirement expense isreduced by the expected return on plan assets, which is measured by assuming that the market-relatedvalue of plan assets increases at the expected rate of return. The market-related value is a calculated valuethat phases in differences between the expected rate of return and the actual return over a period of fiveyears.

Actuarial gains or losses are triggered by changes in assumptions or experience that differ from theoriginal assumptions. Under the applicable accounting standards, those gains and losses are not requiredto be recognized currently as other postretirement expense, but instead may be deferred as part ofaccumulated other comprehensive income and amortized into expense over the average remaining servicelife of the covered active employees. At December 31, 2006, the Company had unrecognized actuarialgains of $120 million for the other postretirement benefit plans recorded in Accumulated othercomprehensive income.

Valuation Allowance for Deferred Tax Assets. The Company initially recorded a tax valuationallowance against its deferred tax assets in the third quarter of 2002. In recording the valuation allowance,management considered whether it was more likely than not that some or all of the deferred tax assetswould be realized. This analysis included consideration of scheduled reversals of deferred tax liabilities,projected future taxable income, carry back potential and tax planning strategies, in accordance withSFAS 109. At December 31, 2006, our valuation allowance totaled $2.2 billion. See also Note 6, “IncomeTaxes,” in the Notes to Consolidated Financial Statements for additional information.

Income Taxes. During the evaluation of our internal control over financial reporting as ofDecember 31, 2006, the Company identified a deficiency in our internal control over financial reportingassociated with tax accounting which constituted a material weakness. While the Company hadappropriately designed control procedures, high staff turnover caused the Company to poorly executethose control procedures for evaluating and recording its current and deferred income tax provision andrelated deferred taxes balances. This control deficiency did not result in a material misstatement, but didresult in adjustments to the deferred tax assets and liabilities, net operating losses, valuation allowance andfootnote disclosures and could have resulted in a misstatement of current and deferred income taxes andrelated disclosures that would result in a material misstatement of annual or interim financial statements.We have and are continuing to take steps to remediate this material weakness, including the hiring ofseveral tax professionals, as well as implementing a more rigorous review process of tax accounting anddisclosure matters. Additional review, evaluation and oversight have been undertaken to ensure our

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consolidated financial statements were prepared in accordance with generally accepted accountingprinciples and, as a result, we have concluded that the consolidated financial statements in this Form 10-Kfairly present, in all material respects, our financial position, results of operations and cash flows for theperiods presented. See also Note 6, “Income Taxes,” in the Notes to Consolidated Financial Statements foradditional information.

New Accounting Pronouncements. For detailed information, see Note 2(p), “Summary of SignificantAccounting Policies—New Accounting Pronouncements,” in the Notes to Consolidated FinancialStatements.

Forward-Looking Information

Certain statements throughout Item 7. Management’s Discussion and Analysis of Financial Conditionand Results of Operations and elsewhere in this report are forward-looking and thus reflect the Company’scurrent expectations and beliefs with respect to certain current and future events and financialperformance. Such forward-looking statements are and will be subject to many risks and uncertaintiesrelating to United’s operations and business environment that may cause actual results to differ materiallyfrom any future results expressed or implied in such forward-looking statements. Words such as “expects,”“will,” “plans,” “anticipates,” “indicates,” “believes,” “forecast,” “guidance,” “outlook” and similarexpressions are intended to identify forward-looking statements.

Additionally, forward-looking statements include statements which do not relate solely to historicalfacts, such as statements which identify uncertainties or trends, discuss the possible future effects ofcurrent known trends or uncertainties, or which indicate that the future effects of known trends oruncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this report arebased upon information available to the Company on the date of this report. The Company undertakes noobligation to publicly update or revise any forward-looking statement, whether as a result of newinformation, future events, changed circumstances or otherwise.

The Company’s actual results could differ materially from these forward-looking statements due tonumerous factors including, without limitation, the following: its ability to comply with the terms offinancing arrangements; the costs and availability of financing; its ability to execute its business plan; itsability to realize benefits from its resource optimization efforts and cost reduction initiatives; its ability toutilize its net operating losses; its ability to attract, motivate and/or retain key employees; its ability toattract and retain customers; demand for transportation in the markets in which it operates; generaleconomic conditions (including interest rates, foreign currency exchange rates, crude oil prices, costs ofaviation fuel and refining capacity in relevant markets); its ability to cost-effectively hedge against increasesin the price of aviation fuel; the effects of any hostilities, act of war or terrorist attack; the ability of otherair carriers with whom the Company has alliances or partnerships to provide the services contemplated bythe respective arrangements with such carriers; the costs and availability of aircraft insurance; the costsassociated with security measures and practices; labor costs; competitive pressures on pricing (particularlyfrom lower-cost competitors) and on demand; capacity decisions of its competitors; U.S. or foreigngovernmental legislation, regulation and other actions; its ability to maintain satisfactory labor relations;any disruptions to operations due to any potential actions by its labor groups; weather conditions; andother risks and uncertainties set forth under Item 1A. Risk Factors of this Form 10-K, as well as other risksand uncertainties set forth from time to time in the reports the Company files with the SEC. Consequently,the forward-looking statements should not be regarded as representations or warranties by the Companythat such matters will be realized.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate and Foreign Currency Exchange Rate Risks—United’s exposure to market riskassociated with changes in interest rates relates primarily to its debt obligations and short-terminvestments. The Company does not use derivative financial instruments in its investment portfolio.United’s policy is to manage interest rate risk through a combination of fixed and floating rate debt and byentering into swap agreements, depending upon market conditions. A portion of United’s capital leaseobligations ($537 million in equivalent U.S. dollars at December 31, 2006) is denominated in foreigncurrencies that expose us to risks associated with changes in foreign exchange rates. To hedge against someof this risk, United has placed foreign currency deposits (primarily for euros) to meet foreign currencylease obligations denominated in those respective currencies. Since unrealized mark-to-market gains orlosses on the foreign currency deposits are offset by the losses or gains on the foreign currency obligations,United reduces its overall exposure to foreign currency exchange rate volatility. The fair value of thesedeposits is determined based on the present value of future cash flows using an appropriate swap rate. Thefair value of long-term debt is based on the quoted market prices for the same or similar issues or thepresent value of future cash flows using a U.S. Treasury rate that matches the remaining life of theinstrument, adjusted by a credit spread. The table below presents information as of December 31, 2006about certain of the Company’s financial instruments that are sensitive to changes in interest and exchangerates.

2006Expected Maturity Dates Fair

(Dollars in millions) 2007 2008 2009 2010 2011 Thereafter Total ValueASSETS

Cash equivalentsFixed rate. . . . . . . . . . . . . . . . . . $3,832 $ — $ — $ — $ — $ — $3,832 $3,832

Avg. interest rate . . . . . . . . . 5.32% — — — — — 5.32%Short term investments

Fixed rate. . . . . . . . . . . . . . . . $ 312 $ — $ — $ — $ — $ — $ 312 $ 312Avg. interest rate . . . . . . . . . 5.32% — — — — — 5.32%

Lease depositsFixed rate—EUR deposits . $ 74 $ 132 $ 22 $ 215 $ 14 $ — $ 457 $ 454Accrued interest . . . . . . . . . . 13 22 2 23 4 — 64Avg. interest rate . . . . . . . . . 5.42% 4.93% 4.34% 6.66% 4.41% — 6.56%

Fixed rate—USD deposits. . . . $ — $ — $ — $ 11 $ — $ — $ 11 $ 19Accrued interest . . . . . . . . . . — — — 7 — — 7Avg. interest rate . . . . . . . . . — — — 6.49% — — 6.49%

LONG-TERM DEBT

U. S. Dollar denominatedVariable rate debt. . . . . . . . . . . $ 183 $ 238 $ 212 $ 281 $ 205 $3,610 $4,729 $4,695

Avg. interest rate . . . . . . . . . 6.69% 6.19% 6.61% 6.05% 6.74% 8.45% 7.97%Fixed rate debt . . . . . . . . . . . . . $ 532 $ 446 $ 547 $ 660 $ 631 $1,842 $4,658 4,815

Avg. interest rate . . . . . . . . . 6.52% 6.55% 6.53% 6.53% 6.47% 5.74% 6.21%

In addition to the cash equivalents and short-term investments included in the table above, theCompany has $341 million of short-term restricted cash and $506 million of long-term restricted cash atDecember 31, 2006. As discussed in Note 2(d), “Summary of Significant Accounting Policies—Cash andCash Equivalents, Short-Term Investments and Restricted Cash” in the Notes to Consolidated Financial

Statements, this cash is being held in restricted accounts for workers’ compensation obligations, securitydeposits for airport leases and reserves with institutions that process United’s credit card ticket sales. Dueto the short term nature of these cash balances, the carrying values approximate the fair values. TheCompany’s interest income is exposed to changes in interest rates on these cash balances.

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In the first quarter of 2006, United entered into an interest rate swap whereby it fixed the rate ofinterest on $2.45 billion notional value of floating-rate debt at 5.14% plus a fixed credit margin. The swaphad a fair value of negative $12 million at December 31, 2006. In January 2007, United terminated theswap. The termination value of the swap was negative $4 million due to an $8 million increase in fair valuefrom December 31, 2006 to the termination date. See Note 14, “Financial Instruments and RiskManagement—Interest Rate Swap,” in the Notes to Consolidated Financial Statements for additionalinformation.

In February 2007, the Company completed a prepayment of a portion of its Credit Facility debt. Thisprepayment reduces the Company’s variable rate debt maturities in the table above by $972 million($10 million in each of 2008, 2009, 2010 and 2011 and $932 million thereafter). See Note 11, “DebtObligations,” in the Notes to Consolidated Financial Statements for additional information.

Price Risk (Aircraft Fuel)—United enters into fuel option contracts and futures contracts to reduceits price risk exposure to jet fuel. These contracts are designed to provide protection against sharpincreases in the price of aircraft fuel. The Company may update its hedging strategy in response to changesin market conditions. The fair value of the Company’s fuel related derivatives was a negative $2 million atDecember 31, 2006. These instruments have a maturity of less than one year.

Foreign Currency—United generates revenues and incurs expenses in numerous foreign currencies.Such expenses include fuel, aircraft leases, commissions, catering, personnel expense, advertising anddistribution costs, customer service expenses and aircraft maintenance. Changes in foreign currencyexchange rates impact the Company’s results of operations through changes in the dollar value of foreigncurrency-denominated operating revenues and expenses.

Despite the adverse effects a strengthening foreign currency may have on demand for U.S.-originatingtraffic, a strengthening of foreign currencies tends to increase reported revenue and operating incomebecause the Company’s foreign currency-denominated operating revenue generally exceeds its foreigncurrency-denominated operating expense for each currency. Likewise, despite the favorable effects aweakening foreign currency may have on demand for U.S.-originating traffic, a weakening of foreigncurrencies tends to decrease reported revenue and operating income.

The Company’s biggest net foreign currency exposures in 2006 were typically for the Canadian dollar,Chinese renminbi, Australian dollar, British pound, Korean won, European euro, Hong Kong dollar andJapanese yen. The table below sets forth the Company’s net exposure to various currencies for 2006:

(In millions) Operating revenue net of operating expenseCurrency Foreign Currency Value USD ValueCanadian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278 $245Chinese renminbi. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,735 218Australian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 122British pound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 98Korean won . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,521 98European euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 97Hong Kong dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . 737 95Japanese yen. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,459 72

At December 31, 2006, the Company did not have any foreign currency derivative instruments.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders ofUAL CorporationElk Grove Township, Illinois

We have audited the accompanying statements of consolidated financial position of UAL Corporationand subsidiaries (the “Company”) as of December 31, 2006 (Successor Company balance sheet) and as ofDecember 31, 2005 (Predecessor Company balance sheet), and the related statements of consolidatedoperations, consolidated stockholders’ equity (deficit), and consolidated cash flows for the SuccessorCompany eleven months ended December 31, 2006 (Successor Company operations) and for the onemonth ended January 31, 2006 and for each of the two years in the period ended December 31, 2005(Predecessor Company operations). Our audits also included the financial statement schedule of theSuccessor Company for the eleven months ended December 31, 2006 and the Predecessor Company forthe one month January 31, 2006 and for each of the two years in the period ended December 31, 2005 aslisted in the Index at Item 15. These consolidated financial statements and financial statement schedule arethe responsibility of the Company’s management. Our responsibility is to express an opinion on thesefinancial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significant estimates madeby management, as well as evaluating the overall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, on January 20, 2006, the BankruptcyCourt entered an order confirming the plan of reorganization which became effective after the close ofbusiness on February 1, 2006. Accordingly, the accompanying consolidated financial statements have beenprepared in conformity with AICPA Statement of Position 90-7, “Financial Reporting by Entities inReorganization Under the Bankruptcy Code,” for the Successor Company as a new entity with assets,liabilities and a capital structure having carrying values not comparable with prior periods as described inNote 1.

In our opinion, the Successor Company consolidated financial statements present fairly, in all materialrespects, the financial position of UAL Corporation and subsidiaries as of December 31, 2006 and theresults of their operations and their cash flows for the eleven month period ended December 31, 2006 inconformity with accounting principles generally accepted in the United States of America. Further, in ouropinion, the Predecessor Company consolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of the Predecessor Company as of December 31, 2005 and theresults of their operations and their cash flows for the one month period ended January 31, 2006 and foreach of the two years in the period ended December 31, 2005, in conformity with accounting principlesgenerally accepted in the United States of America. Also, in our opinion, such Successor Companyfinancial statement schedule and Predecessor Company financial statement schedule, when considered inrelation to the basic consolidated financial statements taken as a whole, presents fairly, in all materialrespects, the information set forth therein.

As discussed in Note 2 to the consolidated financial statements on January 1, 2006, the Companyadopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment”which changed the method of accounting for share based payments and as discussed in Note 2 to the

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consolidated financial statements on December 31, 2006, the Company adopted the recognition andrelated disclosure provisions of Statement of Financial Accounting Standards No. 158, “Employers’Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASBStatements No. 87, 88, 106, and 132R”, which changed the method of accounting for and the disclosuresregarding pension and postretirement benefits.

We have also audited, in accordance with the standards of the Public Company Accounting OversightBoard (United States), the effectiveness of the Company’s internal control over financial reporting as ofDecember 31, 2006, based on the criteria established in Internal Control—Integrated Framework issued bythe Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 16,2007, expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’sinternal control over financial reporting and an adverse opinion on the effectiveness of the Company’sinternal control over financial reporting because of a material weakness.

/s/ Deloitte & Touche LLPChicago, IllinoisMarch 16, 2007

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See accompanying Notes to Consolidated Financial Statements.

62

UAL Corporation and Subsidiary Companies

Statements of Consolidated Operations

(In millions, except per share amounts)

Successor PredecessorPeriod from Period from

February 1 to January 1 to Year EndedDecember 31, January 31, December 31,

2006 2006 2005 2004

Operating revenues:Passenger—United Airlines. . . . . . . . . . . . . . . . . . . . . . . . $13,293 $ 1,074 $ 12,914 $12,542Passenger—Regional Affiliates . . . . . . . . . . . . . . . . . . . . . 2,697 204 2,429 1,931Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 694 56 729 704Other operating revenues. . . . . . . . . . . . . . . . . . . . . . . . . . 1,198 124 1,307 1,214

17,882 1,458 17,379 16,391

Operating expenses:Aircraft fuel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,462 362 4,032 2,943Salaries and related costs . . . . . . . . . . . . . . . . . . . . . . . . . . 3,909 358 4,027 5,006Regional affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,596 228 2,746 2,425Purchased services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,595 134 1,524 1,462Aircraft maintenance materials and outside repairs . . . 929 80 881 747Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 820 68 856 874Landing fees and other rent . . . . . . . . . . . . . . . . . . . . . . . . 801 75 915 964Cost of third party sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 614 65 685 709Aircraft rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 30 402 533Commissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291 24 305 305Special operating items (Note 19). . . . . . . . . . . . . . . . . . . (36) — 18 —Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 1,017 86 1,207 1,277

17,383 1,510 17,598 17,245Earnings (loss) from operations . . . . . . . . . . . . . . . . . . . . . . 499 (52) (219) (854)

Other income (expense):Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (728) (42) (482) (449)Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 6 38 25Interest capitalized. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 — (3) 1Gain on sale of investments (Note 7) . . . . . . . . . . . . . . . . — — — 158Special non-operating items (Note 19). . . . . . . . . . . . . . . — — — 5Miscellaneous, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 — 87 (1)

(456) (36) (360) (261)Earnings (loss) before reorganization items, income taxes

and equity in earnings of affiliates . . . . . . . . . . . . . . . . . . 43 (88) (579) (1,115)Reorganization items, net (Note 1) . . . . . . . . . . . . . . . . . — 22,934 (20,601) (611)

Earnings (loss) before income taxes and equity inearnings of affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 22,846 (21,180) (1,726)

Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 — — —Earnings (loss) before equity in earnings of affiliates . . . . 22 22,846 (21,180) (1,726)Equity in earnings of affiliates, net of tax. . . . . . . . . . . . . . . 3 5 4 5Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25 $22,851 $(21,176) $ (1,721)

Earnings (loss) per share, basic and diluted . . . . . . . . . . $ 0.14 $196.61 $(182.29) $ (15.25)

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63

UAL Corporation and Subsidiary Companies

Statements of Consolidated Financial Position

(In millions, except shares)

Successor PredecessorAt December 31,

2006 2005Assets

Current assets:Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,832 $ 1,761Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341 643Short-term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312 77Receivables, less allowance for doubtful accounts (2006—$27; 2005—$23) . . . 820 839Prepaid fuel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283 258Aircraft fuel, spare parts and supplies, less obsolescence allowance (2006—

$6; 2005—$66) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 193Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 —Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345 488

6,273 4,259Operating property and equipment:

Owned—Flight equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,958 13,443Advances on flight equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 128Other property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,441 3,837

10,502 17,408Less—Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . (503) (6,106)

9,999 11,302Capital leases—

Flight equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,511 2,581Other property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 84

1,545 2,665Less—Accumulated amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (81) (739)

1,464 1,92611,463 13,228

Other assets:Intangibles, less accumulated amortization (2006—$169; 2005—$218). . . . . . . 3,028 371Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,703 17Aircraft lease deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539 477Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506 314Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 20Prepaid rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 67Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 737 589

7,633 1,855$25,369 $19,342

Page 72: ual Annual Report  2006

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64

UAL Corporation and Subsidiary Companies

Statements of Consolidated Financial Position

(In millions, except shares)

Successor PredecessorAt December 31,

2006 2005Liabilities and Stockholders’ Equity (Deficit)

Current liabilities:Long-term debt maturing within one year (Note 11). . . . . . . . . . . . . . . . . . . . . . $ 1,687 $ 13Advance ticket sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,669 1,575Mileage Plus deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,111 681Accrued salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795 844Advanced purchase of miles (Note 18) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681 679Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667 596Fuel purchase commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283 258Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241 32Current obligations under capital leases (Note 16) . . . . . . . . . . . . . . . . . . . . . . . 110 20Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701 536

7,945 5,234

Long-term debt (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,453 1,298Long-term obligations under capital leases (Note 16). . . . . . . . . . . . . . . . . . . . . . . 1,350 102

Other liabilities and deferred credits:Mileage Plus deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,569 242Postretirement benefit liability (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,955 1,932Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688 428Deferred pension liability (Note 8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 95Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 770 555

6,112 3,252Liabilities subject to compromise (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 35,016Mandatorily convertible preferred securities (Note 13) . . . . . . . . . . . . . . . . . . . . . 361 —Commitments and contingent liabilities (Note 15)

Stockholders’ equity (deficit):Predecessor Company preferred stock (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . — —Successor Company preferred stock (Note 13). . . . . . . . . . . . . . . . . . . . . . . . . . . — —Predecessor Company ESOP preferred stock (Note 12) . . . . . . . . . . . . . . . . . . — —Predecessor Company common stock at par, $0.01 par value; authorized

200,000,000 shares; outstanding 116,220,959 shares at December 31, 2005(Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1

Successor Company common stock at par, $0.01 par value; authorized1,000,000,000 shares; outstanding 112,280,629 shares at December 31,2006 (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 —

Additional capital invested. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,053 5,064Retained earnings (deficit). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 (29,122)Predecessor Company stock held in treasury, at cost

Preferred, 10,213,519 depositary shares (Note 13) . . . . . . . . . . . . . . . . . . . . . — (305)Common, 16,121,446 shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (1,162)

Successor Company stock held in treasury, at cost (Note 3) . . . . . . . . . . . . . . . (4) —Accumulated other comprehensive income (loss) (Note 10) . . . . . . . . . . . . . . . 82 (36)

2,148 (25,560)$25,369 $ 19,342

Page 73: ual Annual Report  2006

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65

UAL Corporation and Subsidiary Companies

Statements of Consolidated Cash Flows

(In millions)

Successor Predecessor

Period from Period fromFebruary 1 to January 1 to Year EndedDecember 31, January 31, December 31,

2006 2006 2005 2004Cash flows provided (used) by operating activities:

Net income (loss) before reorganization items . . . . . . . . . . . . . . . . . . . . $ 25 $ (83) $ (575) $(1,110)Adjustments to reconcile to net cash provided (used) by operating

activities—Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 820 68 873 874Mileage Plus deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269 14 329 141Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 — — —Postretirement benefit expense, net of contributions . . . . . . . . . . . . . 76 (9) (41) (51)Special items and debt discount amortization . . . . . . . . . . . . . . . . . . . 47 — 18 —Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 — — 5Pension expense (benefit), net of contributions. . . . . . . . . . . . . . . . . . (4) 8 143 327Gain on sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (2) (158)Amortization of deferred gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (6) (81) (93)Other operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 (1) 54 86

Changes in assets and liabilities—Decrease (increase) in receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 (88) 109 (19)Decrease (increase) in other current assets . . . . . . . . . . . . . . . . . . . . . 14 (24) (75) (25)Increase (decrease) in accounts payable . . . . . . . . . . . . . . . . . . . . . . . 40 19 (40) 101Increase in advance ticket sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 109 214 31Increase (decrease) in accrued liabilities and accrued aircraft rent . . . (257) 154 153 (10)

1,401 161 1,079 99Cash flows provided (used) by reorganization activities:

Reorganization items, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 22,934 (20,601) (611)Discharge of claims and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (24,628) — —Revaluation of Mileage Plus frequent flyer deferred revenue . . . . . . . — 2,399 — —Revaluation of other assets and liabilities . . . . . . . . . . . . . . . . . . . . . . — (2,106) — —Increase in aircraft rejection liability . . . . . . . . . . . . . . . . . . . . . . . . . . — — 2,898 333Impairment on lease certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 134 —Increase (decrease) in other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . — 37 120 (22)Increase in non-aircraft claims accrual . . . . . . . . . . . . . . . . . . . . . . . . — 429 1,220 —Pension curtailment, settlement and employee claims . . . . . . . . . . . . — 912 16,079 152Loss on disposition of property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 10 —

— (23) (140) (148)Cash flows provided (used) by investing activities:

Additions to property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . (332) (30) (470) (267)(Increase) decrease in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . 313 (203) (80) (198)(Increase) decrease in short-term investments . . . . . . . . . . . . . . . . . . (237) 2 1 —Decrease in segregated funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 — — —Sale of MyPoints.com Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 — — —Proceeds on disposition of property and equipment . . . . . . . . . . . . . . 40 (1) 330 21Proceeds on sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 4 218Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (52) (6) (76) (70)

(12) (238) (291) (296)Cash flows provided (used) by financing activities:

Proceeds from Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,961 — — —Repayment of Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (175) — — —Proceeds from DIP financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 310 513Repayment of DIP financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,157) — (16) (313)Repayment of other long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . (664) (24) (285) (180)Principal payments under capital leases . . . . . . . . . . . . . . . . . . . . . . . (99) (5) (94) (244)Increase in deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . (66) (1) (26) (27)Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . 10 — — —Aircraft lease deposits, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 173Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 — 1 6

812 (30) (110) (72)Increase (decrease) in cash and cash equivalents during the period . . . . . . 2,201 (130) 538 (417)Cash and cash equivalents at beginning of period. . . . . . . . . . . . . . . . . . . . 1,631 1,761 1,223 1,640Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . $ 3,832 $ 1,631 $ 1,761 $ 1,223

Page 74: ual Annual Report  2006

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66

UAL Corporation and Subsidiary Companies

Statements of Consolidated Stockholders’ Equity (Deficit)

(In millions)

AccumulatedOther

Additional Retained ComprehensiveCommon Capital Earnings Treasury Income

Stock Invested (Deficit) Stock (Loss) Other TotalBalance at December 31, 2003 (Predecessor

Company) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1 $ 5,066 $ (6,225) $(1,469) $(3,288) $ (1) $ (5,916)

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (1,721) — — — (1,721)Other comprehensive income (loss), net:

Unrealized gains on derivatives, net . . . . . — — — — 3 — 3Minimum pension liability adjustment . . . — — — — (45) — (45)Total comprehensive income (loss), net . . — — (1,721) — (42) — (1,763)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (2) — 2 (2) 1 (1)Balance at December 31, 2004 (Predecessor

Company) . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5,064 (7,946) (1,467) (3,332) — (7,680)

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (21,176) — — — (21,176)Other comprehensive income (loss), net:

Unrealized losses on derivatives, net . . . . — — — — (3) — (3)Minimum pension liability adjustment . . . — — — — 3,299 — 3,299Total comprehensive income (loss), net . . — — (21,176) — 3,296 — (17,880)

Balance at December 31, 2005 (PredecessorCompany) . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5,064 (29,122) (1,467) (36) — (25,560)

Net loss before reorganization items—January 2006. . . . . . . . . . . . . . . . . . . . . . — — (83) — — — (83)

Reorganization items—January 2006 . . . . . . — — (1,401) — — — (1,401)Subtotal (Predecessor Company) . . . . . . . . . . . 1 5,064 (30,606) (1,467) (36) — (27,044)Fresh-start adjustments:

Unsecured claims and debt discharge . . . . . . — — 24,628 — — — 24,628Valuation adjustments, net . . . . . . . . . . . . . — — (293) — — — (293)

Balance at January 31, 2006 (PredecessorCompany) . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5,064 (6,271) (1,467) (36) — (2,709)

Fresh-start adjustments:Cancellation of Predecessor preferred and

common stock. . . . . . . . . . . . . . . . . . . . . (1) (5,064) — 1,467 — — (3,598)Elimination of Predecessor accumulated

deficit and accumulated othercomprehensive loss . . . . . . . . . . . . . . . . . — — 6,271 — 36 — 6,307

Issuance of new equity interests in connectionwith emergence from Chapter 11 . . . . . . . 1 1,884 — — — — 1,885

Balance at February 1, 2006 (SuccessorCompany) . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1,884 — — — — 1,885

Net income from February 1, 2006 toDecember 31, 2006 . . . . . . . . . . . . . . . . . — — 25 — — — 25

Other comprehensive income (loss), net:Unrealized loss on derivatives, net $3 of

tax . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — (5) — (5)Total comprehensive income, net. . . . . . . . . — — 25 — (5) — 20Adoption of SFAS 158, net $47 of tax. . . . . . — — — — 87 — 87Preferred stock dividends . . . . . . . . . . . . . . — — (9) — — — (9)Share-based compensation . . . . . . . . . . . . . — 159 — — — — 159Proceeds from exercise of stock options . . . . — 10 — — — — 10Treasury stock acquisitions . . . . . . . . . . . . . — — — (4) — — (4)

Balance at December 31, 2006 (SuccessorCompany) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1 $ 2,053 $ 16 $ (4) $ 82 $— $ 2,148

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67

UAL Corporation and Subsidiary CompaniesNotes to Consolidated Financial Statements

The Company

UAL Corporation is a holding company and its principal, wholly-owned subsidiary is United AirLines, Inc., a Delaware corporation (“United”). We sometimes collectively refer to UAL Corporation,together with its consolidated subsidiaries, as “we,” “our,” “us,” “UAL” or the “Company.”

As a result of the adoption of fresh-start reporting in accordance with American Institute of CertifiedPublic Accountants’ Statement of Position 90-7 “Financial Reporting by Entities in Reorganization under theBankruptcy Code” (“SOP 90-7”), the financial statements before February 1, 2006 are not comparable withthe financial statements for periods on or after February 1, 2006. References to “Successor Company”refer to UAL on or after February 1, 2006, after giving effect to the adoption of fresh-start reporting.References to “Predecessor Company” refer to UAL before February 1, 2006. See Note 1, “VoluntaryReorganization Under Chapter 11—Fresh-Start Reporting,” for further details.

(1) Voluntary Reorganization Under Chapter 11

Bankruptcy Considerations. The following discussion provides general background informationregarding the Company’s Chapter 11 cases, and is not intended to be an exhaustive summary. Detailedinformation pertaining to the bankruptcy filings may be obtained at www.pd-ual.com.

On December 9, 2002 (the “Petition Date”), UAL, United and 26 direct and indirect wholly-ownedsubsidiaries (collectively, the “Debtors”) filed voluntary petitions to reorganize their businesses underChapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the NorthernDistrict of Illinois, Eastern Division (the “Bankruptcy Court”). On January 20, 2006, the Bankruptcy Courtconfirmed the Debtors’ Second Amended Joint Plan of Reorganization Pursuant to Chapter 11 of theUnited States Bankruptcy Code (the “Plan of Reorganization”). The Plan of Reorganization becameeffective and the Debtors emerged from bankruptcy protection on February 1, 2006 (the “Effective Date”).On the Effective Date, UAL implemented fresh-start reporting.

The Plan of Reorganization generally provided for the full payment or reinstatement of allowedadministrative claims, priority claims and secured claims, and the distribution of new equity and debtsecurities to the Debtors’ creditors and employees in satisfaction of allowed unsecured and deemed claims.The Plan of Reorganization contemplated UAL issuing up to 125 million shares of common stock (out ofthe one billion shares of new common stock authorized under its certificate of incorporation). The newcommon stock was listed on the NASDAQ National Market and began trading under the symbol “UAUA”on February 2, 2006. Ultimately, the distributions of common stock, subject to certain holdbacks asdescribed in the Plan of Reorganization, will be as follows:

• Approximately 115 million shares of common stock to unsecured creditors and employees;

• Up to 9.825 million shares of common stock (or options or other rights to acquire shares) under themanagement equity incentive plan approved by the Bankruptcy Court; and

• Up to 175,000 shares of common stock (or options or other rights to acquire shares) under thedirector equity incentive plan approved by the Bankruptcy Court.

The Plan of Reorganization also provided for the issuance of the following securities:

• 5 million shares of 2% mandatorily convertible preferred stock issued to the Pension BenefitGuaranty Corporation (“PBGC”) shortly after the Effective Date;

• Approximately $150 million in aggregate principal amount of 5% senior convertible notes issued toholders of certain municipal bonds shortly after the Effective Date;

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• $726 million in aggregate principal amount of 4.5% senior limited-subordination convertible notesissued in July 2006 to certain irrevocable trusts established for the benefit of certain employees (the“Limited-Subordination Notes”);

• $500 million in aggregate principal amount of 6% senior notes issued to the PBGC shortly after theEffective Date; and

• $500 million in aggregate principal amount of 8% senior contingent notes (in up to eight equaltranches of $62.5 million) issuable to the PBGC upon the satisfaction of certain contingencies.

Pursuant to the Company’s Plan of Reorganization, the Limited-Subordination Notes were requiredto be issued within 180 days of the Effective Date with a conversion price equal to 125% of the averageclosing price for the 60 consecutive trading days following February 1, 2006, and an interest rateestablished so the notes would trade at par upon issuance. In July 2006, the Company reached agreementwith five of the seven eligible employee groups to modify the conversion price to instead be based upon thevolume-weighted average price of the common stock over the two trading days ending on July 25, 2006, thedate the notes were issued to the trusts. This modification resulted in a new conversion price of $34.84,rather than $46.86 which was the conversion price under the initial terms of the notes. Because thereduction in the conversion price resulted in a benefit to noteholders, the Company was able to issue thenotes at an interest rate of 4.5%, which is a lower rate of interest than would have been required under theinitial terms in order for the notes to trade at par upon issuance. The Company reached agreement withthe two other employee groups to pay them cash totaling approximately $0.4 million rather than issuingadditional notes of similar value. See Note 11, “Debt Obligations—Successor Company Debt,” for furtherinformation.

Pursuant to the Plan of Reorganization, UAL common stock, preferred stock and Trust OriginatedPreferred Securities issued before the Petition Date were canceled on the Effective Date, and nodistribution was made to holders of those securities.

On the Effective Date, the Company secured access to $3.0 billion in secured exit financing (the“Credit Facility”) which consisted of a $2.45 billion term loan, a $350 million delayed draw term loan and a$200 million revolving credit line. On the Effective Date, the $2.45 billion term loan and the entirerevolving credit line, consisting of $161 million in cash and $39 million of letters of credit, were drawn andused to repay the Debtor-In-Possession credit facility (the “DIP Financing”) and to make other paymentsrequired upon exit from bankruptcy, as well as to provide ongoing liquidity to conduct post-reorganizationoperations. Subsequently, during the first quarter of 2006, the Company repaid the entire outstandingbalance on the revolving credit line and accessed the $350 million delayed draw term loan. InFebruary 2007, the Company prepaid $972 million of its Credit Facility debt and amended certain terms ofthe Credit Facility. For further details on the Credit Facility including the facility amendment and theprepayment, see Note 11, “Debt Obligations.”

Significant Matters Resolved Since Emergence from Bankruptcy. During the course of the Chapter 11proceedings, the Company successfully reached settlements with most of its creditor constituencies andresolved most pending claims against the Debtors. The following material matters have been resolved inthe Bankruptcy Court since the Effective Date:

(a) 1997 EETC Aircraft Financings. The Company had an ongoing dispute with respect to a groupof mostly-public financiers (the “Public Debt Group”) involving 14 aircraft financed under theSeries 1997-1 Enhanced Equipment Trust Certificates (“1997-1 EETC”). During the first quarterof 2006, the Company resolved the dispute and entered into a settlement agreement that wasapproved by the Bankruptcy Court. The settlement agreement resolved all pending litigation inconnection with the 1997-1 EETC transaction and aircraft and provided for a permanent mutualrelease of all related claims. The Company remitted $281 million to the 1997-1 EETC trustee asfinal payment to the holders of the Tranche A certificates. The Company previously acquired the

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1997-1 EETC Tranche B and Tranche C certificates as a precursor to utilizing the transaction parbuyout mechanism to purchase the Tranche A certificates. Following shortly thereafter in thefirst quarter of 2006, the Company refinanced the 14 aircraft with the $350 million delayed drawterm loan provided under the Credit Facility. The Company recorded the 1997-1 EETC debt atfair market value upon its emergence from bankruptcy in accordance with fresh-start reporting.As a result, no gain or loss was realized on the extinguishment of debt.

(b) Wells Fargo Appeal of Confirmation Order. Wells Fargo Bank Northwest, N.A., not individuallybut in its capacity as a trustee, filed a notice of appeal of the confirmation order to the UnitedStates District Court for the Northern District of Illinois (“District Court”). The partiessubsequently filed a stipulation agreeing to voluntarily dismiss the appeal, and the appeal hasbeen dismissed.

(c) Pre- and Post-1997 EETC Aircraft Financings. In August 2005, United entered into term sheetsto restructure the three post-1997 Enhanced Equipment Trust Certificate (“EETC”)transactions, financing 80 aircraft in United’s fleet that were controlled by the Public DebtGroup. In May 2006, the Company reached a settlement with the Public Debt Group with respectto these financing transactions. In conjunction with the settlement, the Company and the EETCtrustees agreed to cooperate and to use reasonable efforts to complete definitive documentation.The settlement was approved by the Bankruptcy Court in June 2006. The Company completeddefinitive documentation on the three post-1997 EETC transactions in July 2006 and met itsobligations to have the transactions rated by both Standard and Poor’s and Moody’s.

In addition, in August 2005, United entered into term sheets to restructure the pre-1997transactions financing 19 aircraft that are controlled by the Public Debt Group. United hassubsequently closed transactions covering all of the associated aircraft.

(d) Municipal Bond Litigation at DEN, JFK, SFO and LAX. United is a party to numerous long-termagreements to lease certain airport and maintenance facilities that are financed through tax-exempt municipal bonds that are issued by various local municipalities to build or improve airportand maintenance facilities. During 2003, the Company filed four complaints for declaratoryjudgment and corresponding motions for temporary restraining orders concerning United’smunicipal bond obligations for facilities at Denver International Airport (“DEN”), John F.Kennedy International Airport (“JFK”), San Francisco International Airport (“SFO”) and LosAngeles International Airport (“LAX”). In each case, United sought clarification of itsobligations to pay principal and interest under the applicable municipal bonds, and the protectionof its rights concerning related airport lease agreements at the applicable airports. Final non-appealable court decisions have concluded that the SFO, JFK, and LAX agreements werefinancings, and not true leases. Even though the SFO and LAX obligations have been determinedto be financings and not true leases, there remains an issue regarding the extent to which thosefinancings are considered to have a security interest in the underlying leasehold or the valuethereof, as agreements have secured interests as discussed in “Significant Matters Remaining tobe Resolved in Chapter 11 Cases,” items (a) and (b). A final non-appealable court decision hasconcluded that United’s municipal bond obligations at DEN are a true lease.

(e) O’Hare Airport Use Agreement. In 2003, United filed a complaint for declaratory judgment forall of its municipal bond issues relating to its facilities at O’Hare International Airport(“O’Hare”), seeking a declaration that a certain cross-default provision in the O’Hare airportlease was unenforceable. In 2005, the Bankruptcy Court approved an agreement (“O’HareSettlement Agreement”) resolving the disputes between United, the trustees and thebondholders. The City of Chicago, a party to these adversary proceedings, was not a party to theO’Hare Settlement Agreement. Subsequently, the Company announced that it had reached anagreement in principle with the City of Chicago, with respect to all unresolved disputes relating to

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our facilities at O’Hare. However, the parties were unable to finalize the terms of this settlementas the City of Chicago continued to maintain that it could revoke United’s exclusive rights toterminals in place of “preferential” rights if United did not meet the terms of the cross-defaultprovision (the O’Hare Airport Use Agreement (“AUA”) did not define or provide for any usagerights, other than exclusive rights).

In July 2006, the Bankruptcy Court held that the AUA is a self-contained agreement governingUnited’s use of O’Hare and providing the full consideration for that use. To realize the full valueof United’s estate, the Bankruptcy Code allows United to assume the AUA free from obligationsimposed under the separate bond payment agreements, notwithstanding the cross-defaultprovisions. The time for the City of Chicago to appeal this ruling has expired.

(f) ALPA Agreement Approval. In January 2005, United filed a motion seeking approval of anagreement to restructure the Air Line Pilots Association (“ALPA”) collective bargainingagreement pursuant to Section 363(b) of the Bankruptcy Code. The Bankruptcy Court approvedthe ALPA agreement over the objections of various parties. The active pilots ratified theagreement, and the Bankruptcy Court entered an order approving the ALPA agreement (the“ALPA Order”). In February 2005, the United Retired Pilots Benefit Protection Association andseven retired pilots (collectively, “URPBPA”) filed its notice of appeal of the ALPA Order basedprincipally on the allegation that the ALPA Order unfairly failed to provide for the distributionof the Limited-Subordination Notes to the retired pilots as provided to the active pilots pursuantto the ALPA agreement. The ALPA Order was approved by the District Court and, inMarch 2006, by the Court of Appeals. In June 2006, URPBPA filed a petition for a writ ofcertiorari from the Supreme Court to review the Court of Appeals’ ruling with respect to thismatter. In October 2006, the Supreme Court denied the petition for a writ of certiorari, whicheffectively concluded this matter.

(g) URPBPA Appeal of Confirmation Order. In January 2006, URPBPA filed a notice and briefsupporting an appeal of the order confirming the Plan of Reorganization. In February 2006,United filed a motion to dismiss the appeal based on the substantial consummation of the Plan ofReorganization. In June 2006, the District Court dismissed URPBPA’s appeal for lack ofripeness. Subsequently, URPBPA filed a notice of appeal of the decision to the Court of Appeals.On October 25, 2006, the Court of Appeals reversed the District Court’s order dismissing for lackof ripeness URPBPA’s appeal of the confirmation order and remanded the case to the DistrictCourt with instructions to affirm the confirmation order. On December 4, 2006, the DistrictCourt entered an order affirming the confirmation order. As of January 23, 2007, URPBPA didnot file a petition for writ of certiorari and thus this matter is effectively concluded.

Significant Matters Remaining to be Resolved in Chapter 11 Cases. The following material mattersremain to be resolved in the Bankruptcy Court or another court:

(a) SFO Municipal Bond Secured Interest. HSBC Bank Inc. (“HSBC”), as trustee for the 1997municipal bonds related to SFO, filed a complaint against United asserting a security interest inUnited’s leasehold for portions of its maintenance base at SFO. Pursuant to Section 506(a) of theBankruptcy Code, HSBC alleges that it is entitled to be paid the value of that security interest,which HSBC had claimed was as much as $257 million. HSBC and United went to trial inApril 2006 and the Bankruptcy Court rejected as a matter of law HSBC’s $257 million claim.HSBC subsequently alleged that it was entitled to $154 million, or at a minimum, approximately$93 million. The parties tried the case and filed post-trial briefs which were heard by theBankruptcy Court. In October 2006, the Bankruptcy Court issued its written opinion holding thatthe value of the security interest is approximately $27 million. After the Bankruptcy Court deniedvarious post-trial motions, both parties have appealed to the District Court and those appeals arepending.

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(b) LAX Municipal Bond Secured Interest. In addition, there is pending litigation before theBankruptcy Court regarding the extent to which the LAX municipal bond debt is entitled tosecured status under Section 506(a) of the Bankruptcy Code. Trial in this matter is scheduled forthe week of April 11, 2007. The Company has recorded an obligation of $60 million atDecember 31, 2006 for this matter, which is the Company’s best estimate of the liability.

(c) Pilot Plan Termination Order. In December 2004, the PBGC filed an involuntary terminationproceeding against United, as plan administrator for the United Airlines Pilot Defined BenefitPension Plan (the “Pilot Plan”), in the District Court. In January 2005, the District Court granteda motion filed by the Company and referred the involuntary termination proceeding to theBankruptcy Court. ALPA and URPBPA were later granted leave to intervene in the involuntarytermination proceeding.

After several months, the Bankruptcy Court conducted a trial and determined that the Pilot Planshould be involuntarily terminated under the Employee Retirement Income Security Act(“ERISA”) Section 4042 with a termination date of December 30, 2004. Subsequently, theBankruptcy Court entered an order authorizing termination of the Pilot Plan.

The PBGC, ALPA and URPBPA filed notices of appeal with the District Court. InFebruary 2006, the District Court reversed and remanded the Bankruptcy Court’s terminationorder on the grounds that the matter was not a core proceeding in which it could issue a finalorder, but rather, could only issue proposed findings of fact and conclusions of law forconsideration by the District Court. Upon remand and after the Bankruptcy Court madeproposed findings of fact and conclusions of law and, in June 2006, the District Court entered anorder approving the termination of the Pilot Plan. ALPA, URPBPA and PBGC each filed anappeal with the Court of Appeals. On October 25, 2006, the Court of Appeals affirmed theDistrict Court’s order approving the termination of the Pilot Plan effective December 30, 2004.On November 6, 2006, ALPA filed a petition for rehearing in the Court of Appeals which motionhas been denied. ALPA and URPBPA have filed petitions for writ of certiorari from the UnitedStates Supreme Court on the plan termination. The Supreme Court has yet to rule on suchpetitions. If the termination order was ultimately reversed on appeal, it could have a materiallyadverse effect on the Company’s financial performance, should such determination result in thereversal of the termination of one or more defined benefit pension plans.

(d) Pilot Plan Non-Qualified Pension Benefits. After the PBGC commenced its involuntarytermination proceeding and sought a December 30, 2004 termination date, the Companysuspended payment of non-qualified pension benefits under the Pilot Plan pending the setting ofsuch a termination date. In the first quarter of 2005, the Bankruptcy Court required the Companyto continue paying non-qualified pension benefits to retired pilots pending the outcome of theinvoluntary termination proceeding, notwithstanding the possibility that the Pilot Plan might beterminated retroactively to December 30, 2004. Then, on October 6, 2005, despite its oral rulingterminating the Pilot Plan, the Bankruptcy Court entered an order requiring the Company tocontinue paying non-qualified pension benefits until entry of a written order. However, Unitedappealed that order and placed approximately $6 million necessary to pay non-qualified benefitsfor the month of October 2005 in a segregated account. Following the entry of the BankruptcyCourt’s termination order on October 28, 2005, United ceased paying non-qualified benefits.Subsequently, during the first quarter of 2006, the District Court dismissed the Company’s appealof the Bankruptcy Court’s October 6, 2005 order in light of its earlier decision reversing theBankruptcy Court’s termination order. The Company filed a notice of appeal of the DistrictCourt’s ruling regarding the October 6, 2005 order to the Court of Appeals. On October 25, 2006,the Court of Appeals reversed the District Court’s order dismissing for lack of ripeness theCompany’s appeal of the Bankruptcy Court’s October 6, 2005 order and remanded the case with

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instructions to reverse the Bankruptcy Court’s order compelling payment of non-qualifiedbenefits for October 2005 or later months. On November 6, 2006, ALPA filed a petition forrehearing on the Court of Appeals reversal of the October 6, 2005 order, which motion has beendenied. ALPA and URPBPA have filed petitions for writ of certiorari from the Supreme Court.The Supreme Court has yet to rule on such petitions.

In March 2006, the Bankruptcy Court ruled that the Company was obligated to make payment ofall non-qualified pension benefits for the months of November and December 2005 andJanuary 2006. The Bankruptcy Court also ruled that the Company’s obligation to pay non-qualified pension benefits ceased as of January 31, 2006. The Company filed a notice of appeal ofthe Bankruptcy Court’s ruling to the District Court. URPBPA and ALPA also filed notices ofappeal with respect to the Bankruptcy Court’s order, which were subsequently consolidated withthe Company’s appeal. United agreed with URPBPA and ALPA to pay the disputed non-qualified pension benefits for the months of November and December 2005 and January 2006, anaggregate amount totaling approximately $17 million, into an escrow account. The District Courtaffirmed the Bankruptcy Court’s ruling in September 2006. The Company filed a notice of appealof the District Court’s ruling to the Court of Appeals. URPBPA and ALPA also appealed theDistrict Court’s decision. The Company subsequently filed a motion to consolidate its appealfrom the Bankruptcy Court’s October 2005 non-qualified benefits order with the three appealsfrom the Bankruptcy Court’s March 2006 non-qualified benefits order. The Court of Appealsdenied the Company’s motion, but issued an order staying briefing on the March 2006 non-qualified benefits order until further order of the Court of Appeals. In light of the Court ofAppeals’ October 25, 2006 decision described above, the Company is reasonably optimistic of asuccessful outcome of its appeal in this matter, although there can be no assurances that theultimate outcome of this appeal will be favorable to the Company.

Claims Resolution Process. As permitted under the bankruptcy process, the Debtors’ creditors filedproofs of claim with the Bankruptcy Court. Through the claims resolution process, the Company identifiedmany claims which were disallowed by the Bankruptcy Court for a number of reasons, such as claims thatwere duplicative, amended or superseded by later filed claims, were without merit, or were otherwiseoverstated. Throughout the Chapter 11 proceedings, the Company resolved many claims throughsettlement or objections ordered by the Bankruptcy Court. The Company will continue to settle claims andfile additional objections with the Bankruptcy Court.

With respect to unsecured claims, once a claim is deemed to be valid, either through the BankruptcyCourt process or through other means, the claimant is entitled to a distribution of common stock in theSuccessor Company. Pursuant to the terms of the Plan of Reorganization, 115 million shares of commonstock in the Successor Company have been authorized to be issued to satisfy valid unsecured claims. TheBankruptcy Court confirmed the Plan of Reorganization and established January 20, 2006 as the recorddate for purposes of establishing the persons that are claimholders of record to receive distributions.Approximately 108 million common shares have been issued and distributed to holders of valid unsecuredclaims between February 2, 2006, the first distribution date established in the Plan of Reorganization, andDecember 31, 2006. As of December 31, 2006, approximately 45,000 valid unsecured claims aggregating toapproximately $29 billion in claim value had received those common shares to partially satisfy those claims.The approximately 7 million remaining shares are being held in reserve to satisfy all of the remainingdisputed and undisputed unsecured claim values, once the remaining claim disputes are resolved.

The Company’s current estimate of the probable range of unsecured claims to be allowed by theBankruptcy Court is between $29 billion and $30 billion. Differences between claim amounts filed and theCompany’s estimates continue to be investigated and will be resolved in connection with the claimsresolution process. However, there will be no further financial impact to the Company associated with thesettlement of such unsecured claims, as the holders of all allowed unsecured claims will receive under the

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Plan of Reorganization no more than their pro rata share of the distribution of the 115 million shares ofcommon stock of the Successor Company, together with the previously-agreed issuance of certainsecurities.

With respect to valid administrative and priority claims, pursuant to the terms of the Plan ofReorganization these claims will be satisfied with cash. Many asserted administrative and priority claimsstill remain unpaid, and the Company will continue to settle claims and file objections with the BankruptcyCourt to eliminate or reduce such claims. An estimate of these claims was accrued by the SuccessorCompany on the Effective Date based upon the best available evidence of amounts to be paid. However, itshould be noted that the claims resolution process is uncertain and adjustments to claims estimates couldresult in material adjustments to the Successor Company’s financial statements in future periods. The mostsignificant items included in the adjustments made to this accrual since the Effective Date are $36 millionfor special items associated with certain litigation, as discussed in Note 19, “Special Items.” In addition,net accruals and adjustments of $29 million have been made which relate primarily to revisions of claimestimates for aircraft financings, tax matters and professional fees as a result of the receipt of new orrevised information or the finalization of these matters.

Additionally, secured claims were deemed unimpaired under the Plan of Reorganization, pursuant towhich these claims were satisfied by reinstatement of the obligations in the Successor Company,surrendering the collateral to the secured party, or by making full payment in cash. However, certaindisputes, the most significant of which are discussed in “Significant Matters Remaining to be Resolved inChapter 11 Cases,” above, still remain with respect to the valuation of certain claims. Revisions to theCompany’s estimates of its liability for these claims due to the receipt of new information or final courtrulings on these claims may result in material future adjustments to the Company’s financial statements.

The table below includes activity related to the administrative and priority claims and otherbankruptcy-related claim reserves including reserves related to legal, professional and tax matters, amongothers, for the Successor Company for the eleven months ended December 31, 2006. These reserves areprimarily classified in other current liabilities and other non-current liabilities in the Statements ofConsolidated Financial Position based on the expected timing of resolution of these matters.

(In millions)Balance at February 1, 2006 . . . . . . . . . . . . . . . $ 583

Accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Accrual adjustments. . . . . . . . . . . . . . . . . . . . (80)Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (193)

Balance at December 31, 2006 . . . . . . . . . . . . . $ 325

Financial Statement Presentation. The Company has prepared the accompanying consolidatedfinancial statements in accordance with SOP 90-7 and on a going-concern basis, which assumes continuityof operations, realization of assets and satisfaction of liabilities in the ordinary course of business.

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SOP 90-7 requires that the financial statements for periods after a Chapter 11 filing separatetransactions and events that are directly associated with the reorganization from the ongoing operations ofthe business. Accordingly, all transactions (including, but not limited to, all professional fees, realized gainsand losses and provisions for losses) directly associated with the reorganization and restructuring of thebusiness are reported separately in the financial statements as reorganization items, net. For the monthended January 31, 2006 and the years ended December 31, 2005 and 2004, the Predecessor Companyrecognized the following primarily non-cash reorganization income (expense) in its financial statements:

Period fromJanuary 1 to 31,

Year EndedDecember 31,

(In millions) 2006 2005 2004Discharge of claims and liabilities. . . . . . . . . . . . . . . . . . . . $24,628 $ — $ — (a)Revaluation of frequent flyer obligations . . . . . . . . . . . . . (2,399) — — (b)Revaluation of other assets and liabilities . . . . . . . . . . . . . 2,106 — — (c)Employee-related charges . . . . . . . . . . . . . . . . . . . . . . . . . . (898) (6,529) (13)(d)Contract rejection charges . . . . . . . . . . . . . . . . . . . . . . . . . . (429) (523) — (e)Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (47) (230) (160)Pension-related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14) (8,925) (152)(f)Aircraft claim charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (3,005) (341)(g)Municipal bond charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (688) — (h)Retiree-related charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (652) — (i)Impairment on lease certificates . . . . . . . . . . . . . . . . . . . . . — (134) — (j)Aircraft refinance adjustments . . . . . . . . . . . . . . . . . . . . . . — 60 — (j)Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13) 25 55

$22,934 $(20,601) $(611)

(a) The discharge of claims and liabilities primarily relates to those unsecured claims arising during thebankruptcy process, such as those arising from the termination and settlement of the Company’s U.S.defined benefit pension plans and other employee claims; aircraft-related claims, such as those arisingas a result of aircraft rejections; other unsecured claims due to the rejection or modification ofexecutory contracts, unexpired leases and regional carrier contracts; and claims associated with certainmunicipal bond obligations based upon their rejection, settlement or the estimated impact of theoutcome of pending litigation. In accordance with the Plan of Reorganization, the Companydischarged its obligations to unsecured creditors in exchange for the distribution of 115 millioncommon shares of the Successor Company and the issuance of certain other securities. Accordingly,the Company recognized a non-cash reorganization gain of $24.6 billion.

(b) The Company revalued its Mileage Plus Frequent Flyer Program (“Mileage Plus”) obligations at fairvalue as a result of fresh-start reporting, which resulted in a $2.4 billion non-cash reorganizationcharge.

(c) In accordance with fresh-start reporting, the Company revalued its assets at their estimated fair valueand liabilities at estimated fair value or the present value of amounts to be paid. This resulted in anon-cash reorganization gain of $2.1 billion, primarily as a result of newly recognized intangible assets,offset partly by reductions in the fair value of tangible property and equipment.

(d) In exchange for employees’ contributions to the successful reorganization of the Company, includingagreeing to reductions in pay and benefits, the Company agreed in the Plan of Reorganization toprovide each employee group a deemed claim which was used to provide a distribution of a portion ofthe equity of the reorganized entity to those employees. Each employee group received a deemedclaim amount based upon a portion of the value of cost savings provided by that group throughreductions to pay and benefits as well as through certain work rule changes. The total value of this

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deemed claim was approximately $7.4 billion. As of December 31, 2005, the Company recorded a non-cash reorganization charge of $6.5 billion for the deemed claim amount for all union-representedemployees. The remaining $0.9 billion associated with non-represented salaried and managementemployees was recorded as a reorganization charge in January 2006, upon confirmation of the Plan ofReorganization.

(e) Contract rejection charges are non-cash costs that include estimated claim values resulting from theCompany’s rejection or negotiated modification of certain contractual obligations such as executorycontracts, unexpired leases and regional carrier contracts.

(f) Upon termination and settlement of the Pension Plans, the Company recognized non-cashcurtailment charges of $640 million and $152 million in 2005 and 2004, respectively, associated withactions taken by the PBGC to involuntarily terminate United Air Lines, Inc. Ground Employees’Retirement Plan (the “Ground Employees Plan”), United Airlines Flight Attendant Defined BenefitPension Plan (the “Flight Attendant Plan”) and United Airlines Management, Administrative andPublic Contact Defined Benefit Pension Plan (“MAPC Plan”). The PBGC was appointed trustee forthe Ground Employees Plan effective May 23, 2005 and the MAPC Plan and the Flight AttendantPlan effective June 30, 2005, assuming all rights and powers over the pension assets and obligations ofeach plan. Upon termination and settlement of these plans, the Company recognized non-cash netsettlement losses of approximately $1.1 billion in 2005 in accordance with Statement of FinancialAccounting Standards No. 88, “Employer’s Accounting for Settlements and Curtailments of DefinedBenefit Pension Plans and for Termination Benefits” (“SFAS 88”). Further, the Company recognized anon-cash charge of $7.2 billion related to a final settlement with the PBGC as a result of thetermination of the defined benefit pension plans. In addition, the Company recognized a non-cashsettlement loss in the amount of $10 million during 2005 for the termination of the non-qualifiedsupplemental retirement plan for management employees who had benefits under the tax-qualifiedpension plan that could not be paid under the qualified plan due to Internal Revenue Codelimitations.

(g) Aircraft claim charges include the Company’s estimate of claims incurred as a result of the rejection ofcertain aircraft leases and return of aircraft as part of the bankruptcy process, together with certainclaims resulting from the modification of other aircraft financings in bankruptcy.

(h) Municipal bond obligations include the Company’s best estimate of unsecured claims incurred as aresult of certain restructured municipal bond obligations, together with certain claims expected toresult from the rejection and litigation of other municipal bond obligations. The ultimate dispositionof several bond obligations, specifically SFO and LAX, remains subject to the uncertain outcome ofpending litigation. In recognition of this and other claims contingencies which remain unresolved, theCompany continues to withhold a portion of the equity distribution authorized by the Plan ofReorganization to unsecured creditors and other claimants. See “Claims Resolution Process” and“Significant Matters Remaining to be Resolved in Chapter 11 Cases,” above, for further details.

(i) In 2004, the Company reached agreement with representatives of its retirees to modify medical andlife insurance benefits for individuals who had retired from United before July of 2003, as providedunder Section 1114 of the Bankruptcy Code (“retiree welfare benefit claims”). As a result, theCompany proposed, as part of the approved Plan of Reorganization, a general unsecured claim forthese changes to retiree benefits for each of the eligible individuals. The aggregate amount of retireewelfare benefit claims allowed by the Bankruptcy Court pursuant to these agreements and theCompany’s confirmed Plan of Reorganization was approximately $652 million.

(j) In accordance with the term sheets reached with the Public Debt Group, the Company agreed tocancel certain 1997-1 EETC certificates that were held by a related party. Accordingly, in 2005, theCompany recorded a non-cash charge in the amount of $134 million for the principal and interest on

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such certificates. In addition, the Company recorded adjustments retroactively for aircraft rent andinterest expense in the amount of $60 million to reflect the revised aircraft financing terms.

The Statements of Consolidated Financial Position distinguish pre-petition liabilities subject tocompromise from both those pre-petition liabilities that are not subject to compromise and from post-petition liabilities. Liabilities subject to compromise were reported at the amounts expected to be allowedby the Bankruptcy Court, even if they were settled for lesser amounts.

At December 31, 2005, the Company had Liabilities subject to compromise consisting of thefollowing:

(In millions)Employee claims and deemed claims. . . . . . . . . . . . . . . . . . . . . . . . $18,007Long-term debt, including accrued interest . . . . . . . . . . . . . . . . . . 6,624Aircraft-related obligations and deferred gains . . . . . . . . . . . . . . . 6,104Capital lease obligations, including accrued interest . . . . . . . . . . 1,631Municipal bond obligations and claims . . . . . . . . . . . . . . . . . . . . . . 1,344Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261Early termination fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 883

$35,016

DIP Financing. At January 31, 2006, the Company’s outstanding balance of its DIP Financing was$1.2 billion. On the Effective Date, the proceeds from the Credit Facility were drawn and used to repaythe DIP Financing. For further details on the Credit Facility, see Note 11, “Debt Obligations.”

Fresh-Start Reporting. Upon emergence from its Chapter 11 proceedings on February 1, 2006, theCompany adopted fresh-start reporting in accordance with SOP 90-7. The Company’s emergence fromChapter 11 resulted in a new reporting entity with no retained earnings or accumulated deficit.Accordingly, the Company’s consolidated financial statements on or after February 1, 2006 are notcomparable to its pre-emergence consolidated financial statements because they are, in effect, those of anew entity. See the Company’s Statements of Consolidated Financial Position, below.

Fresh-start reporting reflects the value of the Company as determined in the confirmed Plan ofReorganization. Under fresh-start reporting, the Company’s asset values are remeasured using fair value,and are allocated in conformity with Statement of Financial Accounting Standards No. 141, “BusinessCombinations” (“SFAS 141”). The excess of reorganization value over the fair value of net tangible andidentifiable intangible assets and liabilities is recorded as goodwill in the accompanying Statements ofConsolidated Financial Position. In addition, fresh-start reporting also requires that all liabilities, other thandeferred taxes, should be stated at fair value or at the present values of the amounts to be paid usingappropriate market interest rates. Deferred taxes are determined in conformity with Statement ofFinancial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”).

Estimates of fair value represent the Company’s best estimates, which are based on industry data andtrends and by reference to relevant market rates and transactions, and discounted cash flow valuationmethods, among other factors. The foregoing estimates and assumptions are inherently subject tosignificant uncertainties and contingencies beyond the control of the Company. Accordingly, the Companycannot provide assurance that the estimates, assumptions, and values reflected in the valuations will berealized, and actual results could vary materially. In accordance with SFAS 141, the preliminary allocationof the reorganization value was subject to additional adjustment within one year after emergence frombankruptcy to provide the Company with the time to complete the valuation of its assets and liabilities.

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This adjustment allocation period ended January 31, 2007; see (c) “Revaluation of Assets and Liabilities,”below, for further information about adjustments recorded by the Company after the Effective Date.

To facilitate the calculation of the enterprise value of the Successor Company, the Companydeveloped a set of financial projections. Based on these financial projections, the equity value wasdetermined by the Company, using various valuation methods, including (i) a comparison of the Companyand its projected performance to the market values of comparable companies; (ii) a review and analysis ofseveral recent transactions of companies in similar industries to the Company; and (iii) a calculation of thepresent value of the future cash flows of the Company under its projections.

The estimated enterprise value, and corresponding equity value, is highly dependent upon achievingthe future financial results set forth in the projections as well as the realization of certain otherassumptions. The estimated equity value of the Company was calculated to be approximately $1.9 billion.The estimates and assumptions made in this valuation are inherently subject to significant uncertaintiesand the resolution of contingencies beyond the reasonable control of the Company. Accordingly, there canbe no assurance that the estimates, assumptions, and amounts reflected in the valuations will be realized,and actual results could vary materially. Moreover, the market value of the Company’s common stock maydiffer materially from the equity valuation.

In accordance with SOP 90-7, the Company was required to adopt on February 1, 2006 all accountingguidance that was going to become effective within the subsequent twelve-month period. See Note 2(o),“Summary of Significant Accounting Policies—Adopted Accounting Pronouncements.”

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The implementation of the Plan of Reorganization and the effects of the consummation of thetransactions contemplated therein, which included settlement of various liabilities, issuance of certainsecurities, incurrence of new indebtedness, repayment of old indebtedness, and other cash payments andthe adoption of fresh-start reporting in the Company’s Statements of Consolidated Financial Position are asfollows:

Fresh-Start Adjustments

(In millions, except shares) Predecessor

(a)Settlement

ofUnsecured

Claims

(b)Reinstatementof Liabilities

(c)Revaluation

of Assetsand

Liabilities SuccessorAssetsCurrent assets:

Cash and cash equivalents . . . . . . . . . . $ 1,631 $ — $— $ — $ 1,631Restricted cash . . . . . . . . . . . . . . . . . . . . 847 — — 1 848Short-term investments. . . . . . . . . . . . . 75 — — — 75Receivables, net . . . . . . . . . . . . . . . . . . . 935 — — 10 945Prepaid fuel. . . . . . . . . . . . . . . . . . . . . . . 280 — — — 280Aircraft fuel, spare parts and supplies,

net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195— —

(24) 171Deferred income taxes . . . . . . . . . . . . . 27 — — 102 129Prepaid expenses and other . . . . . . . . . 499 — — 105 604

4,489 — — 194 4,683

Operating property and equipment:Owned—

Flight equipment . . . . . . . . . . . . . . . . 13,446 — — (4,842) 8,604Advances on flight equipment . . . . . 128 (25) — — 103Other property and equipment . . . . 3,838 — — (2,545) 1,293

17,412 (25) — (7,387) 10,000Less—Accumulated depreciation

and amortization . . . . . . . . . . . . . . (6,158) ——

6,158 —11,254 (25) — (1,229) 10,000

Capital leasesFlight equipment . . . . . . . . . . . . . . . . 2,581 — — (1,145) 1,436Other property and equipment . . . . 84 — — (69) 15

2,665 — — (1,214) 1,451Less—Accumulated amortization. . (747) — — 747 —

1,918 — — (467) 1,45113,172 (25) — (1,696) 11,451

Other assets:Intangibles, net . . . . . . . . . . . . . . . . . . . . 350 — — 2,842 3,192Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . 17 14 — 2,734 2,765Aircraft lease deposits. . . . . . . . . . . . . . 492 — — — 492Restricted cash . . . . . . . . . . . . . . . . . . . . 315 — — — 315Investments . . . . . . . . . . . . . . . . . . . . . . . 25 — — 87 112Prepaid rent . . . . . . . . . . . . . . . . . . . . . . 66 — — (58) 8Pension assets . . . . . . . . . . . . . . . . . . . . . 10 — — (9) 1Other, net . . . . . . . . . . . . . . . . . . . . . . . . 619 — — 201 820

1,894 14 — 5,797 7,705Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $19,555 $(11) $— $ 4,295 $23,839

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Fresh-Start Adjustments

(In millions, except shares) Predecessor

(a)Settlement

ofUnsecured

Claims

(b)Reinstatementof Liabilities

(c)Revaluation

of Assetsand

Liabilities SuccessorLiabilities & Stockholders’ Equity (Deficit)Current liabilities:

Long-term debt maturing within one year . . $ 13 $ — $ 519 $ — $ 532Advance ticket sales . . . . . . . . . . . . . . . . . . . . . 1,679 — — (14) 1,665Mileage Plus deferred revenue. . . . . . . . . . . . 709 — — 356 1,065Accrued salaries, wages and benefits. . . . . . . 927 37 — — 964Advanced purchase of miles . . . . . . . . . . . . . . 686 — — — 686Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 614 — — 3 617Fuel purchase commitments . . . . . . . . . . . . . . 280 — — — 280Current obligations under capital leases . . . . 20 — 77 (5) 92Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617 90 546 (18) 1,235

5,545 127 1,142 322 7,136Long-term debt:

DIP Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 1,157 — — — 1,157Limited-Subordination Notes . . . . . . . . . . . . . — 708 — — 708Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 424 5,115 (143) 5,537

1,298 1,132 5,115 (143) 7,402Long-term obligations under capital leases . . . 101 — 1,209 (35) 1,275

Other liabilities and deferred credits:Mileage Plus deferred revenue. . . . . . . . . . . . 276 — — 2,065 2,341Postretirement benefit liability . . . . . . . . . . . . 1,918 — — 66 1,984Deferred income taxes. . . . . . . . . . . . . . . . . . . 478 — — 218 696Deferred pension liability . . . . . . . . . . . . . . . . 95 — — 29 124Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 552 1 79 12 644

3,319 1 79 2,390 5,789Liabilities subject to compromise . . . . . . . . . . . . 36,336 (28,136) (7,545) (655) —Mandatorily convertible preferred stock . . . . . . — 352 — — 352

Stockholders’ equity (deficit):Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . — — — — —ESOP preferred stock . . . . . . . . . . . . . . . . . . . — — — — —Common stock at par . . . . . . . . . . . . . . . . . . . . 1 1 — (1) 1Additional capital invested . . . . . . . . . . . . . . . 5,064 1,884 — (5,064) 1,884Retained earnings (deficit) . . . . . . . . . . . . . . . (30,606) 24,628 — 5,978 —Stock held in treasury, at cost

Preferred, 10,213,519 depositary shares . . (305) — — 305 —Common, 16,121,446 shares . . . . . . . . . . . . (1,162) — — 1,162 —

Accumulated other comprehensive income(loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (36) —

—36 —

(27,044) 26,513 — 2,416 1,885Total liabilities & stockholders’ equity

(deficit). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,555 $ (11) $ — $ 4,295 $23,839

(a) Settlement of Unsecured Claims. This column reflects a discharge of $28.1 billion of liabilities subject tocompromise pursuant to the terms of the Plan of Reorganization. Along with other creditor andemployee claims incurred through the bankruptcy proceedings (i.e., by the rejection of aircraft,executory contracts, etc.), discharged liabilities include claims related to termination of the Debtors’defined benefit pension plans. Pursuant to the Plan of Reorganization, the unsecured creditors willreceive 115 million common shares of the Successor Company in satisfaction of such claims, together

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with certain debt securities and preferred stock. The Company recorded a $24.6 billion non-cashreorganization gain on the discharge of unsecured claims net of newly-issued securities. See “FinancialStatement Presentation,” above, and Note 11, “Debt Obligations,” for further details.

(b) Reinstatement of Liabilities. This column reflects the reinstatement of certain secured liabilitiespursuant to the terms of the Plan of Reorganization. As a result of the reinstatement of liabilities, theCompany reclassified $7.5 billion of liabilities subject to compromise.

• $7.1 billion represents the reinstatement of secured debt plus accrued interest.

• $0.4 billion represents accruals for administrative and priority payments, reinstatement of certainmunicipal bond obligations, and other accruals of payments required under the Plan ofReorganization.

(c) Revaluation of Assets and Liabilities. Fresh-start adjustments are made to reflect asset values at theirestimated fair value and liabilities at estimated fair value or the present value of amounts to be paid,including:

• Recognition of additional estimated fair value of $2.8 billion for international route authorities,airport slots, trade names and other separately-identifiable intangible assets,

• Recognition of additional estimated fair value of $2.4 billion for the Mileage Plus frequent flyerobligation,

• Adjustments of $1.3 billion to reduce the values of operating property and equipment, includingowned assets and assets under capital leases, to their estimated fair market value,

• Adjustments of $0.4 billion to reduce recorded flight equipment net book value as a result ofrefinancing certain aircraft from mortgage and capital lease financing to operating lease financing,

• The elimination of the Predecessor Company’s equity accounts, and establishment of the openingequity of the Successor Company, and

• Net changes in deferred tax assets and liabilities, together with other miscellaneous adjustments.

Additionally, goodwill of $2.8 billion was recorded upon our exit from bankruptcy to reflect the excessof the Successor Company’s reorganization value over the estimated fair value of net tangible andidentifiable intangible assets and liabilities. In addition, deferred tax assets and liabilities were adjustedbased upon additional information, including adjustments to fair value estimates of underlying assets andliabilities.

Post-Emergence Items. Certain additional Successor Company material transactions occurred on orafter February 2, 2006 and have been reflected in the accompanying Statements of Consolidated FinancialPosition as of December 31, 2006.

Release of Segregated Funds. The Company reclassified $271 million for the release of cashpreviously restricted by a certain credit card processor. Additionally, $200 million of cash segregated forthe payment of certain tax liabilities and recorded as other current assets before the Effective Date, wasreleased and reclassified to unrestricted cash.

Goodwill. During the eleven months ended December 31, 2006, goodwill was decreased by$62 million as a result of net adjustments to the valuation allowance for deferred tax assets. See Note 2(k),“Summary of Significant Accounting Policies—Intangibles,” for further information.

Credit Facility Financing Transactions. On the Effective Date, the Company received $1.4 billion innet proceeds from the Credit Facility, consisting of borrowings of $2.6 billion under the Credit Facility

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which includes $161 million borrowed under the revolving credit facility, and the simultaneous repaymentof the Company’s $1.2 billion DIP Financing. For further details, see Note 11, “Debt Obligations.”

Adjustments of Preconfirmation Contingencies. The Company recorded its best estimates for certainpreconfirmation contingent liabilities that were not resolved at the Effective Date. In accordance withAICPA Practice Bulletin 11, “Accounting for Preconfirmation Contingencies in Fresh-Start Reporting,”(“Practice Bulletin 11”), the Company has recorded the impact of revisions to these estimates in currentresults of operations. In 2006, the Company recorded a net benefit of $36 million to operating income fromadjustments to its SFO and LAX municipal bond obligations and its pilot non-qualified pension planobligations. These matters are discussed above and in Note 19, “Special Items.” The net benefit of$36 million was classified as a Special item on the Company’s 2006 Statement of Consolidated Operations.The Company also recorded an additional $29 million net benefit in 2006, which was due to the resolutionof numerous outstanding issues related primarily to the Company’s aircraft, professional fees and taxessubsequent to the Company’s emergence from bankruptcy.

(2) Summary of Significant Accounting Policies

(a) Basis of Presentation—UAL is a holding company whose principal subsidiary is United. Theconsolidated financial statements include the accounts of UAL Corporation and all of its majority-owned affiliates. All significant intercompany transactions are eliminated. Certain prior year amountshave been reclassified to conform to the current year’s presentation.

Upon emergence from its Chapter 11 proceedings, the Company adopted fresh-start reporting inaccordance with SOP 90-7 as of February 1, 2006. The Company’s emergence from reorganizationresulted in a new reporting entity with no retained earnings or accumulated deficit as of February 1,2006. Accordingly, the Company’s consolidated financial statements for periods before February 1,2006 are not comparable to consolidated financial statements presented on or after February 1, 2006.

(b) Use of Estimates—The preparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America (“GAAP”) requires management to makeestimates and assumptions that affect the amounts reported in the financial statements andaccompanying notes. Actual results could differ from those estimates.

Under fresh-start reporting, the Company’s asset values are remeasured using fair value, which isallocated using the purchase method of accounting in conformity with SFAS 141. In addition, fresh-start reporting also requires that all liabilities, other than deferred taxes, should be stated at fair value,or at the present values of the amounts to be paid using appropriate market interest rates. Deferredtaxes are determined in conformity with SFAS 109.

Estimates of the fair value of assets and liabilities were determined based on the Company’s bestestimates as discussed in Note 1, “Voluntary Reorganization Under Chapter 11—Fresh-StartReporting,” above. These estimates and assumptions are inherently subject to significant uncertaintiesand contingencies beyond the control of the Company. Accordingly, the Company cannot provideassurance that the estimates, assumptions, and values reflected in the valuations will be realized, andactual results could vary materially.

(c) Airline Revenues—The value of unused passenger tickets and miscellaneous charge orders (“MCO’s”)are included in current liabilities as advance ticket sales. United records passenger ticket sales asoperating revenues when the transportation is provided or when the ticket expires. Non-refundabletickets generally expire on the date of the intended flight, unless the date is extended by notificationfrom the customer on or before the intended flight date. Fees charged in association with changes orextensions to nonrefundable tickets are recorded as passenger revenue at the time the fee is incurred.Change fees related to non-refundable tickets are considered a separate transaction from the air

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transportation because they represent a charge for the Company’s additional service to modify aprevious order. Therefore, the pricing of the change fee and the initial customer order are separatelydetermined and represent distinct earnings processes. Refundable tickets expire after one year.MCO’s are stored value documents that are either exchanged for a passenger ticket or refunded afterissuance. United records an estimate of MCO’s that will not be exchanged or refunded as revenueratably over the validity period based on historical results. Due to complex industry pricing structures,refund and exchange policies, and interline agreements with other airlines, certain amounts arerecognized as revenue using estimates both as to the timing of recognition and the amount of revenueto be recognized. These estimates are based on the evaluation of actual historical results. Unitedrecognizes cargo and mail revenue as service is provided.

(d) Cash and Cash Equivalents, Short-Term Investments and Restricted Cash—Cash in excess of operatingrequirements is invested in short-term, highly liquid, income-producing investments. Investments witha maturity of three months or less on their acquisition date are classified as cash and cash equivalents.Other investments are classified as short-term investments. Investments classified as held-to-maturityare stated at amortized cost, which approximates market due to their short-term maturities.Investments in debt securities classified as available-for-sale are stated at fair value. The gains orlosses from sales of available-for-sale securities are included in interest income.

At December 31, 2006, the Successor Company’s investments in debt securities classified as held-to-maturity included $3.8 billion recorded in cash and cash equivalents and $312 million recorded inshort-term investments. At December 31, 2005, the Predecessor Company’s investments in debtsecurities included $1.6 billion classified as held-to-maturity and recorded in cash and cash equivalentsand $77 million classified as available-for-sale and recorded in short-term investments.

The Successor Company had $341 million classified as short-term restricted cash at December 31,2006 while the Predecessor Company had $643 million in short-term restricted cash at December 31,2005, representing security for workers’ compensation obligations, security deposits for airport leasesand reserves with institutions that process our credit card ticket sales. In addition, the SuccessorCompany had $506 million, and the Predecessor Company had $314 million, in long-term restrictedcash at December 31, 2006 and 2005, respectively. Financial and other institutions with which theCompany conducts its business may require additional levels of security deposits or reserve holdbacks.

(e) Aircraft Fuel, Spare Parts and Supplies—In accordance with fresh-start reporting, aircraft fuel,maintenance and operating supplies were revalued to estimated fair values on February 1, 2006. Flightequipment spare parts were also stated at estimated fair value at the Effective Date. The Companyrecords fuel, maintenance, operating supplies, and aircraft spare parts at cost when acquired, andprovides an obsolescence allowance for aircraft spare parts.

(f) Operating Property and Equipment—Owned operating property and equipment, and equipment undercapital leases, were stated at fair value as of February 1, 2006. The Company records additions toowned operating property and equipment at cost when acquired. Property under capital leases, andthe related obligation for future lease payments, is recorded at an amount equal to the initial presentvalue of those lease payments.

Depreciation and amortization of owned depreciable assets is based on the straight-line method overthe assets’ estimated service lives. Leasehold improvements are amortized over the remaining term ofthe lease, including estimated facility renewal options when renewal is reasonably assured at keyairports, or the estimated service life of the related asset, whichever is less. Aircraft are depreciated toestimated salvage values, generally over lives of 27 to 30 years; buildings are depreciated over lives of25 to 45 years; and other property and equipment are depreciated over lives of 4 to 15 years.

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Properties under capital leases are amortized on the straight-line method over the life of the lease or,in the case of certain aircraft, over their estimated service lives. Lease terms are 9 to 17 years foraircraft and 40 years for buildings. Amortization of capital leases is included in depreciation andamortization expense.

Maintenance and repairs, including the cost of minor replacements, are charged to maintenanceexpense as incurred, except for costs incurred under our power-by-the-hour engine maintenanceagreements, which are expensed based upon the number of hours flown. Costs of additions to andrenewals of units of property are capitalized as property and equipment additions.

(g) Mileage Plus Awards—As a result of the adoption of fresh-start reporting, the Mileage Plus frequentflyer obligation was revalued at the Effective Date to reflect the estimated fair value of miles to beredeemed in the future. Outstanding miles earned by flying United or its partner carriers wererevalued using a weighted-average per-mile equivalent ticket value, taking into account such factors asdiffering classes of service and domestic and international ticket itineraries, which can be reflected inawards chosen by Mileage Plus members.

The Successor Company also elected to change its accounting policy as of the Effective Date from anincremental cost basis to a deferred revenue model, to measure its obligation for miles to beredeemed based upon the equivalent ticket value of similar fares on United or amounts paid to otherStar Alliance partners, as applicable. For customer accounts which are inactive for a period of 36consecutive months, it is United’s policy to cancel all miles contained in those accounts at the end ofthe 36 month period of inactivity. The Company recognizes revenue from the breakage of miles insuch deactivated accounts by amortizing such breakage over the 36-month expiration period.

In early 2007, the Company announced that it will reduce the expiration period from 36 months to 18months effective December 31, 2007. Additional future changes to program rules and programredemption opportunities can significantly alter customer behavior from historical patterns, whichmay result in material changes to the deferred revenue balance, as well as passenger revenues.

At December 31, 2006, the Successor Company had recorded deferred revenue for its frequent flyerprogram of $3.7 billion related to award travel, of which $1.1 billion was current. At December 31,2005, the Predecessor Company had recorded deferred revenue totaling $923 million, of which$681 million was current.

See Note 18, “Advanced Purchase of Miles,” for additional information related to the Mileage Plusprogram.

(h) Deferred Gains—Gains on aircraft sale and leaseback transactions are deferred and amortized over theterms of the related leases as a reduction of aircraft rent expense.

(i) United Express—United has agreements under which independent regional carriers, flying under theUnited Express name, connect passengers to other United Express and/or United flights (the latter ofwhom we also refer to as “mainline” operations, to distinguish them from United Express regionaloperations). The vast majority of United Express flights are operated under capacity agreements,while a relatively smaller number are operated under prorate agreements.

United Express operating revenues and expenses are classified as “Passenger—Regional Affiliates”and “Regional affiliates,” respectively, on the attached Statements of Consolidated Operations, thelatter includes both allocated and direct costs. Direct costs represent expenses that are specifically andexclusively related to United Express flying activities, such as capacity agreement payments,commissions, booking fees, fuel expenses and dedicated staffing. The capacity agreement paymentsare based on specific rates for various operating expenses of the United Express carriers, such as crewexpenses, maintenance and aircraft ownership, some of which are multiplied by specific operatingstatistics (e.g., block hours, departures) while others are fixed per month. Allocated costs represent

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United Express’s portion of shared expenses and include charges for items such as airport operatingcosts, reservation-related costs, credit card discount fees and facility rents. For each of these expensecategories, the Company estimates United Express’s portion of total expense and allocates theapplicable portion of expense to the United Express carrier.

United has the right to exclusively operate and direct the operations of these aircraft, and accordinglythe minimum future lease payments for these United Express -operated aircraft are included in theCompany’s lease obligations. See Note 9, “Segment Information” and Note 16, “Lease Obligations,”for additional information related to United Express.

The Company recognizes revenue as flown on a net basis for the United Express prorate carriers.

United has call options on 152 regional jet aircraft currently being operated by certain United Expresscarriers. Generally, these options are intended to allow United to secure control over regional jetsused for United Express routes only when a United Express carrier contract is terminated early due toperformance or safety issues, breach of codeshare limitations or is wrongfully terminated by theregional affiliate carrier. The options would allow United to have an alternative to replace capacitythat was previously provided by a cancelled United Express contract. The conditions under whichUnited can exercise these call options vary by contract, but include operational performance metricsand in some cases the financial standing of one or both of the parties. At December 31, 2006, none ofthe call options were exercisable.

(j) Advertising—Advertising costs, which are included in other operating expenses, are expensed asincurred. Upon adoption of fresh-start reporting, the Company changed its accounting policy torecord the Mileage Plus obligation using a deferred revenue model. Before emergence frombankruptcy, the Predecessor Company recorded both deferred revenue and advertising expenserelating to Mileage Plus activity using an incremental cost method.

(k) Intangibles—Goodwill represents the excess of the reorganization value of the Successor Companyover the fair value of net tangible assets and identifiable intangible assets and liabilities resulting fromthe application of SOP 90-7. Identifiable intangible assets consist primarily of international routeauthorities, trade-names, the Mileage Plus customer database, airport slots and gates, certainfavorable contracts, hubs, patents, and other items. Most airport slots, international route authoritiesand trade-names are indefinite-lived and, as such, are not amortized. Instead, these indefinite-livedintangible assets are reviewed for impairment annually or more frequently if events or circumstancesindicate that the asset may be impaired. The Mileage Plus customer database is amortized on anaccelerated basis utilizing cash flows correlating to the expected attrition rate of the Mileage Plusdatabase. The other customer relationships, which are included in “Contracts” in the table below, areamortized in a manner consistent with the timing and amount of revenues that the Company expectsto generate from these customer relationships. All other definite-lived intangible assets are amortizedon a straight-line basis over the estimated lives of the related assets.

In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other

Intangible Assets” (“SFAS 142”), the Company applies a fair value-based impairment test to the netbook value of goodwill and indefinite-lived intangible assets on an annual basis as of October 1, or onan interim basis whenever a triggering event occurs. No impairments of goodwill or indefinite-livedassets have been identified since the Effective Date.

As discussed in Note 9, “Segment Information,” in 2006 the Company determined that it has tworeportable segments that reflect the management of its business: mainline and United Express. Priorto this determination, the Company’s reportable segments under Statement of Financial AccountingStandards No. 131, “Disclosures about Segments of an Enterprise and Related Information,”(“SFAS 131”) included four geographic segments and UAL Loyalty Services, LLC (“ULS”). At theEffective Date, the Company allocated goodwill to the Pacific, Latin America and ULS segments.

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After determining the Company’s reportable segments were mainline and United Express, theCompany reevaluated the goodwill allocation and determined that all goodwill was in the mainlinesegment. SFAS 142 requires that a two-step impairment test be performed on goodwill. In the firststep, the Company compares the fair value of each reportable segment to its carrying value. If the fairvalue of a reportable segment exceeds the carrying value of the net assets of the reportable segment,goodwill is not impaired and the Company is not required to perform further testing. If the carryingvalue of the net assets of a reportable segment exceeds the fair value of the reportable segment, thenthe Company must perform the second step to determine the implied fair value of the goodwill andcompare it to the carrying value of the goodwill. If the carrying value of goodwill exceeds its impliedfair value, then the Company must record an impairment charge equal to such difference.

The Company assesses the fair value of the mainline segment considering both the market and incomeapproaches. Under the market approach, the fair value of the reportable segment is based on acomparison of similar publicly traded companies. Under the income approach, the fair value of thereportable segment is based on the present value of estimated future cash flows. The income approachis dependent on a number of assumptions including estimates of future capacity, passenger yield,traffic, operating costs including jet fuel prices, appropriate discount rates and other relevantassumptions.

The following table presents information about the intangible assets of the Successor and Predecessorcompanies, including goodwill, at December 31, 2006 and 2005, respectively:

Successor PredecessorWeighted 2006 2005

(In millions)Average

LifeGross Carrying

AmountAccumulatedAmortization

Gross CarryingAmount

AccumulatedAmortization

Amortized intangible assetsAirport slots and gates . . . . . . . . 9 years $ 72 $ 14 $ 32 $ 19Hubs . . . . . . . . . . . . . . . . . . . . . . . . 20 years 145 7 — —Patents . . . . . . . . . . . . . . . . . . . . . . 3 years 70 21 — —Mileage Plus database. . . . . . . . . 7 years 521 77 — —Contracts . . . . . . . . . . . . . . . . . . . . 13 years 216 48 — —Other . . . . . . . . . . . . . . . . . . . . . . . 7 years 18 2 48 34

10 years $1,042 $169 80 53

Route authorities—PredecessorCompany . . . . . . . . . . . . . . . . . . 509 165

$589 $218

Unamortized intangible assetsGoodwill . . . . . . . . . . . . . . . . . . . . $2,703 $ 17Airport slots and gates . . . . . . . . 255 —Route authorities . . . . . . . . . . . . . 1,146 —Trade-name. . . . . . . . . . . . . . . . . . 754 —

$4,858 $ 17

The Company initially recorded goodwill of $2,756 million upon its exit from bankruptcy. During theeleven month period ended December 31, 2006, goodwill was decreased by $62 million due toSuccessor Company tax activity that impacted the deferred tax asset valuation allowance, andincreased by $9 million due to net adjustments to the fair values of certain assets and liabilities,resulting in goodwill of $2,703 million at December 31, 2006. Total amortization expense recognizedwas approximately $1 million for the one month period ended January 31, 2006, $169 million for theeleven month period ended December 31, 2006 and $8 million for the year ended December 31, 2005.The Company expects to record amortization expense of $155 million, $92 million, $69 million, $64million and $58 million for 2007, 2008, 2009, 2010 and 2011, respectively.

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(l) Measurement of Impairments—In accordance with Statement of Financial Accounting StandardsNo. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” and SFAS 142, theCompany evaluates the carrying value of long-lived assets and intangible assets subject to amortizationwhenever events or changes in circumstances indicate that an impairment may exist. An impairmentcharge is recognized when the asset’s carrying value exceeds its net undiscounted future cash flowsand its fair market value. The amount of the charge is the difference between the asset’s carryingvalue and fair market value. At December 31, 2006, the Company had assets held-for-sale of$13 million. In 2006, the Company recorded an impairment charge of $5 million to decrease thecarrying value of assets held-for-sale to their estimated fair value. See Note 19, “Special Items,” forinformation related to the 2005 impairment charge.

(m) Share-Based Compensation—The Company adopted Statement of Financial Accounting StandardsNo. 123 (Revised 2004), “Share-Based Payment” (“SFAS 123R”) effective January 1, 2006. Thispronouncement requires companies to measure the cost of employee services received in exchange foran award of equity instruments based on the grant-date fair value of the award. The resulting cost isrecognized over the period during which an employee is required to provide service in exchange forthe award, usually the vesting period.

Before the adoption of SFAS 123R, the Company accounted for these plans under AccountingPrinciples Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB 25”) anddisclosed the pro forma compensation expense as required under Statement of Financial AccountingStandards No. 123, “Accounting for Stock Based Compensation,” (“SFAS 123”). No stock-basedemployee compensation cost for stock options is reflected in the Company’s financial statements for2005 or 2004, as all options granted had an exercise price equal to the market value of the underlyingcommon stock on the date of grant.

If compensation cost for stock-based employee compensation plans had been determined using thefair value recognition provisions of SFAS 123, the Company would have reported its 2005 and 2004net loss and loss per share as the pro forma amounts indicated below:

Year Ended December 31,(In millions, except per share) 2005 2004Net income (loss), as reported . . . . . . . . . . . . . . . . . . . . . . . . . . $(21,176) $(1,721)

Less: Total compensation expense determined under fairvalue method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) (10)

Net loss, pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(21,180) $(1,731)

Net loss per share:Basic and Diluted—as reported . . . . . . . . . . . . . . . . . . . . . . . $(182.29) $(15.25)Basic and Diluted—pro forma . . . . . . . . . . . . . . . . . . . . . . . . $(182.33) $(15.34)

See Note 5, “Share-Based Compensation Plans,” for additional information.

(n) Excise Taxes—Certain governmental taxes are imposed on United’s ticket sales through a fee includedin ticket prices. United collects these fees and remits them to the appropriate government agency.These fees are recorded on a net basis (excluded from operating revenues).

(o) Adopted Accounting Pronouncements—As discussed above, the Company adopted SFAS 123R effectiveJanuary 1, 2006. In addition, the Financial Accounting Standards Board (“FASB”) issued Statementof Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension andOther Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)”(“SFAS 158”) in September 2006, which requires companies to recognize the overfunded orunderfunded status of all defined benefit postretirement plans as an asset or liability in the statementof financial position and to recognize changes in that funded status through comprehensive income inthe year in which the changes occur. As part of the adoption of fresh-start reporting in accordance

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with SOP 90-7 as of February 1, 2006, the obligation for the Company’s defined benefitpostretirement plans was recorded at fair value in the Company’s Statements of Consolidated FinancialPosition. See Note 8, “Retirement and Postretirement Plans,” for additional information regarding theimpact of adoption of SFAS 158.

(p) New Accounting Pronouncements—In July 2006, the FASB issued FASB Interpretation No. 48,“Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109”(“FIN 48”), which modifies the accounting and disclosure associated with certain aspects ofrecognition and measurement related to accounting for income taxes. FIN 48 is effective for fiscalyears beginning after December 15, 2006. The FASB proposed FASB Staff Position (“FSP”) No. 48-a,“Definition of Settlement in FASB Interpretation No. 48,” that would provide additional guidancerelated to FIN 48. This FSP could be issued in early 2007 after the March 28, 2007 comment deadline.In light of the significance of this new accounting interpretation and pending issuance of the FSP, theCompany has not yet determined the impact of the adoption of FIN 48 on the Company’s financialposition or results of operations.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “FairValue Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuringfair value, and expands disclosure about fair value measurements. SFAS 157 does not require any newfair value measurements; rather it specifies valuation methods and disclosures to be applied when fairvalue measurements are required under existing or future accounting pronouncements. SFAS 157 iseffective for fiscal years beginning after November 15, 2007, and interim periods within those fiscalyears. The Company has not determined the impact of SFAS 157 on its results of operations orfinancial position.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB No. 108”), whichprovides guidance for the quantification and evaluation of materiality of financial statementmisstatements. The Company applied the provisions of SAB No. 108 in the preparation of its financialstatements for the year ended December 31, 2006. The adoption of this guidance did not impact theCompany’s financial statements.

In November 2006, the FASB ratified EITF Issue No. 06-06, “Debtor’s Accounting for a Modification(or Exchange) of Convertible Debt Instruments” (“EITF 06-6”). This standard amends EITF IssueNo. 96-19, “Debtor’s Accounting for a Modification or Exchange of Debt Instruments” and supersedesEITF Issue No. 05-07, “Accounting for Modifications to Conversion Options Embedded in DebtInstruments and Related Issues.” This standard affects issuers that modify the terms of (or thatexchange) convertible debt instruments that contain an embedded conversion option not accountedfor as a derivative under Statement of Financial Accounting Standards No. 133, “Accounting forDerivative Instruments and Hedging Activities” (“SFAS 133”) and the testing criteria. This EITF appliesto modifications (or exchanges) in interim or annual reporting periods beginning after November 29,2006.

In November 2006, the FASB ratified EITF Issue No. 06-07, “Issuer’s Accounting for a PreviouslyBifurcated Conversion Option in a Convertible Debt Instrument When the Conversion Option No LongerMeets the Bifurcation Criteria in FASB Statement No. 133” (“EITF 06-07”). EITF 06-07 affectsconvertible debt issuers with previously bifurcated conversion options that no longer require separatederivative accounting under SFAS 133. EITF 06-07 states that when a previously bifurcatedconversion option no longer requires separate accounting, the issuer shall disclose (1) a description ofthe change causing the conversion option to no longer require bifurcation and (2) the amount of thederivative liability reclassified to shareholders’ equity. EITF 06-07 is effective for interim and annualperiods beginning after December 15, 2006. The Company expects EITF 06-07 will not have amaterial impact on its consolidated financial statements.

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In February 2006, the FASB issued Statement of Financial Accounting Standards No. 159, “The FairValue Option for Financial Assets and Liabilities Including an amendment of FASB Statement No. 115”(“SFAS 159”). This statement permits entities to choose to measure many financial instruments andcertain other items at fair value that are not currently required to be measured at fair value. Theobjective of SFAS 159 is to improve financial reporting by providing entities with the opportunity tomitigate volatility in reported earnings caused by measuring related assets and liabilities differentlywithout having to apply complex hedge accounting provisions. SFAS 159 also established presentationand disclosure requirements designed to facilitate comparisons between entities that choose differentmeasurement attributes for similar types of assets and liabilities. This statement does not affect anyexisting accounting literature that requires certain assets and liabilities to be carried at fair value. Thisstatement is effective for the Company as of January 1, 2008; however, early adoption is permitted.The Company has not determined the impact, if any, that adoption of this statement will have on itsconsolidated financial statements.

(q) Tax Contingencies—In accordance with Statement of Financial Accounting Standards No. 5,“Accounting for Contingencies,” the Company has recorded reserves for taxes and associated interestthat may become payable in future years as a result of audits by tax authorities. Although it believesthat the positions taken by the Company on previously filed tax returns are reasonable, the Companynevertheless has established tax and interest reserves in recognition that various taxing authoritiesmay challenge certain of the positions taken by the Company, potentially resulting in additionalliabilities for taxes and interest. The Company’s tax contingency reserves are reviewed periodically andare adjusted as events occur that affect its estimates, such as the availability of new information, thelapsing of applicable statutes of limitations, the conclusion of tax audits, the measurement ofadditional estimated liability based on current calculations, the identification of new tax contingencies,the release of administrative tax guidance affecting its estimates of tax liabilities, or the rendering ofrelevant court decisions.

(3) Common Stockholders’ Equity

As a result the Plan of Reorganization becoming effective on February 1, 2006, the then-outstandingequity securities as well as the shares held in treasury of the Predecessor Company were canceled. Newshares of UAL common stock began trading on the NASDAQ market on February 2, 2006 under thesymbol “UAUA”. In accordance with the Plan of Reorganization, the Successor Company established theequity structure in the table below upon emergence.

Party of Interest

Shares ofSuccessor Company

Common StockGeneral unsecured creditors and employees . . . . . . . . . . . . . . . . . . . . 115,000,000Management equity incentive plan (“MEIP”) . . . . . . . . . . . . . . . . . . . 9,825,000Director equity incentive plan (“DEIP”). . . . . . . . . . . . . . . . . . . . . . . . 175,000

125,000,000

Pursuant to the Plan of Reorganization, on February 2, 2006 the Successor Company begandistributing portions of the total 125 million shares of new common stock to certain general unsecuredcreditors and employees and certain management employees and non-employee directors. The remainingundistributed shares will be distributed periodically to employees and holders of previously allowed claimsand disputed claims that are pending final resolution, as well as to certain management employees andnon-employee directors of the Successor Company who may receive awards under stock compensationplans. All treasury shares were MEIP shares acquired either for tax withholding obligations or asconsideration under an employment agreement. Forfeited MEIP shares or MEIP shares that are settledfor cash or stock are automatically available again for issuance under the MEIP. For further details, seeNote 4, “Per Share Amounts” and Note 5, “Share-Based Compensation Plans.”

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Changes in the number of shares of UAL common stock outstanding during the eleven month periodended December 31, 2006, the one month period ended January 31, 2006 and the years endedDecember 31, 2005 and 2004 were as follows:

Successor PredecessorPeriod from Period from

February 1 to January 1 to Year EndedDecember 31, January 31, December 31,

2006 2006 2005 2004

Shares outstanding at beginning of period. . . . . . . . . . . . . 116,220,959 116,220,959 116,220,959 110,415,179Cancellation of Predecessor Company stock . . . . . . . . (116,220,959) — — —Issuance of Successor Company stock to creditors. . . . 108,347,814 — — —Issuance of Successor Company stock to employees . . 4,240,526 — — —Issuance of Successor Company stock to directors. . . . 100,000 — — —Forfeiture of non-vested Successor Company stock. . . (270,934) — — —Shares issued from treasury under compensation

arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —— —

21,078Shares acquired for treasury . . . . . . . . . . . . . . . . . . . . . . (136,777) — — (59,483)Conversion of ESOP preferred stock. . . . . . . . . . . . . . . — — — 5,844,194Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — (9)

Shares outstanding at end of period . . . . . . . . . . . . . . . . . . 112,280,629 116,220,959 116,220,959 116,220,959

(4) Per Share Amounts

In accordance with Statement of Financial Accounting Standards No. 128, “Earnings per Share”(“SFAS 128”), basic per share amounts were computed by dividing earnings (loss) available to commonshareholders by the weighted-average number of shares of common stock outstanding. Approximately7 million shares remaining to be issued to unsecured creditors and employees under the Plan ofReorganization are included in outstanding basic shares as the necessary conditions for issuance have beensatisfied. The table below represents the reconciliation of the basic earnings per share to diluted earningsper share.

Successor PredecessorPeriod fromFebruary 1

to December 31,

Period fromJanuary 1

to January 31,Year Ended

December 31,(In millions, except per share) 2006 2006 2005 2004

Basic earnings per share:Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25 $22,851 $(21,176) $(1,721)Preferred stock dividend requirements . . . . . . . . . . . (9) (1) (10) (10)Earnings (loss) available to common stockholders . $ 16 $22,850 $(21,186) $(1,731)

Basic weighted-average shares outstanding. . . . . . . . 115.5 116.2 116.2 113.5

Earnings (loss) per share, basic . . . . . . . . . . . . . . . . . . $ 0.14 $196.61 $(182.29) $(15.25)

Diluted earnings per share:Earnings (loss) available to common stockholders . $ 16 $22,850 $(21,186) $(1,731)

Basic weighted-average shares outstanding. . . . . . . . 115.5 116.2 116.2 113.5Effect of non-vested restricted shares . . . . . . . . . . . . 0.7 — — —Diluted weighted-average shares outstanding. . . . . . 116.2 116.2 116.2 113.5

Earnings (loss) per share, diluted . . . . . . . . . . . . . . . . $ 0.14 $196.61 $(182.29) $(15.25)

In accordance with SFAS 128, no potential common share is included in the diluted per sharecomputation if it is antidilutive. When an entity reports a loss available for common shareholders, theeffect of including potential common shares is antidilutive. Accordingly, the Company did not include any

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potential common shares in the diluted earnings per share computations for the periods that resulted in aloss. For the eleven month period ended December 31, 2006, the one month period ended January 31,2006 and the years ended December 31, 2005 and 2004, the Company did not include 5 million, 9 million,9 million and 10 million of outstanding stock options, respectively, in the diluted per share computation asthey were antidilutive during those periods based on application of the treasury stock method. In addition,for the eleven months ended December 31, 2006, the Company did not include 21 million of potentialcommon shares related to the Limited-Subordination Notes, 11 million of potential common shares relatedto the preferred securities or 3 million of potential common shares related to the 5% convertible notes inthe diluted per share computation as they were determined to be antidilutive.

(5) Share-Based Compensation Plans

See Note 2(m), “Share-Based Compensation,” for information regarding the Company’s adoption ofSFAS 123R effective January 1, 2006, and pro forma compensation expense for 2005 and 2004.

Predecessor Company—As of January 31, 2006, a total of 9 million stock options were outstanding. TheCompany did not issue any stock-based awards during 2005 or 2004. Under the Company’s Plan ofReorganization, these stock options were canceled on the Effective Date. No material share-basedcompensation expense was incurred as a result of these outstanding options for the month of January 2006.

Successor Company—As part of the Plan of Reorganization and as described in more detail below, theBankruptcy Court approved the Company’s share-based compensation plans known as the MEIP and theDEIP which became effective on February 1, 2006. The following table summarizes the number of awardsauthorized, issued and available for future grants under each plan as of December 31, 2006:

MEIP DEIP Total

Authorized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,825,000 175,000 10,000,000Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,931,650) (100,000) (10,031,650)Cancelled awards available for reissuance . . . . 1,028,186 — 1,028,186Available for future grants . . . . . . . . . . . . . . . . . . 921,536 75,000 996,536

The Successor Company recognized share-based compensation expense for each plan during theeleven months ended December 31, 2006 as follows:

(In millions)

Period fromFebruary 1 toDecember 31,

2006

MEIP restricted stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 84MEIP stock options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72DEIP unrestricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $159

During the second quarter of 2006, the Company revised its initial estimated award forfeiture rate of7.5% to 15% based upon actual attrition. As a result, the share-based compensation expense was reducedby approximately $7 million for the eleven month period ended December 31, 2006.

As of December 31, 2006, approximately $80 million of total unrecognized costs related to nonvestedshares are expected to be recognized over the remaining weighted-average period of 3.1 years.Approximately $45 million is expected to be recognized in 2007.

Management Equity Incentive Plan. The Human Resources Subcommittee of the UAL Board ofDirectors (the “HR Subcommittee”) is authorized under the plan to grant equity-based and otherperformance-based awards (“Award(s)”) to executive officers and other key management employees of theCompany and its subsidiaries.

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All executive officers and other key management employees of the Company and its subsidiaries areeligible to become participants in the MEIP. The HR Subcommittee will select from time to time, fromamong all eligible individuals, the persons who will be granted an Award. The MEIP authorizes the HRSubcommittee to grant any of a variety of incentive Awards to participants, including the following:

• stock options, including both tax qualified and non-qualified options,

• stock appreciation rights, which provide the participant the right to receive the excess (if any) of thefair market value of a specified number of shares of common stock at the time of exercise over thegrant price of the stock appreciation right,

• stock awards to be granted at no cost to the participant, including grants in the form of (i) animmediate transfer of shares which are subject to forfeiture and certain transfer restrictions(“Restricted Stock”); and (ii) an immediate transfer of shares which are not subject to forfeiture ora deferred transfer of shares if and when the conditions specified by the HR Subcommittee are met(“Unrestricted Stock”), and

• performance-based awards, in which the HR Subcommittee may grant a stock award that willentitle the holder to receive a specified number of shares of common stock, or the cash valuethereof, if certain performance goals are met.

The shares may be issued from authorized and unissued shares of common stock or from theCompany’s treasury stock. The exercise price for each underlying share of common stock under all optionsand stock appreciation rights awarded under the MEIP will not be less than the fair market value of ashare of common stock on the date of grant or as otherwise determined by the HR Subcommittee.

The table below summarizes stock option activity pursuant to the Company’s MEIP stock options forthe period February 1 through December 31, 2006:

Options

Weighted-Average

Exercise Price

Weighted-AverageRemainingContractual

Life (in years)

AggregateIntrinsic Value

(in millions)

Outstanding at beginning of period . . . . . . . . — — — $ —Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,979,812 $35.13Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (288,688) 34.94Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (626,452) 35.25Outstanding at end of period . . . . . . . . . . . . . . 5,064,672 35.13 9.1 $ 45

Vested or expected to vest at end of period . 4,794,152 35.15 9.1 $ 42Vested at end of period. . . . . . . . . . . . . . . . . . . 821,083 35.38 9.1 7

The weighted-average fair value of options granted for the period February 1, 2006 to December 31,2006, was determined to be $21.37 based on the following assumptions:

Risk-free interest rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4-5.1%Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0%Expected market price volatility of our common stock . . . . . 55-57%Expected life of options (years) . . . . . . . . . . . . . . . . . . . . . . . . . 5.0-6.2

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The fair value of options was determined at the grant date using a Black-Scholes option pricingmodel, which requires the Company to make several assumptions. The risk-free interest rate is based onthe U.S. Treasury yield curve in effect for the expected term of the option at the time of grant. Thedividend yield on the Company’s common stock is assumed to be zero since it does not pay dividends andhas no current plans to do so in the future.

The volatility assumptions were based upon historical volatilities of comparable airlines whose sharesare traded using daily stock price returns equivalent to the contractual term of the option. Due to itsemergence from more than three years in bankruptcy, historical volatility data for UAL was not consideredin determining expected volatility. The Company did consider implied volatility data for both UAL andcomparable airlines, using current exchange-traded options.

The expected life of the options was determined based upon a simplified assumption that the optionwill be exercised evenly from vesting to expiration under the transitional guidance of Staff AccountingBulletin No. 107, Topic 14, “Share-Based Payments.”

The stock options typically vest over a four year period, except for awards to retirement-eligibleemployees, which are considered vested at the grant date.

The table below summarizes Restricted Stock activity for the period February 1 throughDecember 31, 2006:

Weighted-Average

Restricted Stock Grant PriceNonvested at beginning of period. . . . . . . . . . . . . . . . . . . . . . — —Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,951,838 $36.78Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (837,317) 36.95Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (401,734) 36.95Nonvested at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,712,787 36.71

Under SFAS 123R, the fair value of the Restricted Stock awards was based upon the volumeweighted-average share price on the date of grant. The Restricted Stock awards typically vest over fouryears, except for awards to retirement-eligible employees, which are considered vested at the grant date.Approximately 2.5 million of the 2.7 million nonvested restricted stock awards at December 31, 2006 areexpected to vest.

Director Equity Incentive Plan. The Nominating/Governance Committee of the Board of Directors(the “Governance Committee”) is authorized to grant equity-based awards to non-employee directors ofthe Company under the plan. The DEIP authorizes the Governance Committee to grant any of a variety ofincentive awards to participants, including the following:

• non-qualified stock options,

• stock appreciation rights, which provide the participant the right to receive the excess (if any) of thefair market value of a specified number of shares of common stock at the time of exercise over thegrant price of the stock appreciation right,

• stock awards to be granted at no cost to the participant, including grants in the form of RestrictedStock and Unrestricted Stock,

• annual compensation in the form of credits to a participant’s share account established under theDEIP, and

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• shares of common stock in lieu of receipt of all or any portion of cash amounts payable by theCompany to a participant including retainer fees, board attendance fees and committee fees (butexcluding expense reimbursements and similar items).

The shares may be issued from authorized and unissued shares of common stock or from theCompany’s treasury stock. The exercise price for each underlying share of common stock under all optionsand stock appreciation rights awarded under the DEIP will not be less than the fair market value of a shareof common stock on the date of grant. Each option granted under the DEIP will generally expire 10 yearsafter its date of grant. The 100,000 unrestricted shares issued under the DEIP in the eleven month periodended December 31, 2006 immediately vested on their respective grant dates.

(6) Income Taxes

In 2006 and 2005, UAL incurred both a regular tax loss and an alternative minimum tax (“AMT”)loss. The primary differences between its regular tax loss and AMT loss were certain depreciationadjustments and preferences.

The significant components of the deferred income tax provision (credit) are as follows:

Successor PredecessorPeriod fromFebruary 1

to December 31,

Period fromJanuary 1

to January 31,Year Ended

December 31,(In millions) 2006 2006 2005 2004Deferred tax provision (exclusive of the other

components listed below) . . . . . . . . . . . . . . . . . . . . . . . . $21 $ 8,488 $(7,830) $(640)Increase (decrease) in the valuation allowance for

deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (8,488) 7,830 640$21 $ — $ — $ —

The income tax provision differed from amounts computed at the statutory federal income tax rate, asfollows:

Successor PredecessorPeriod fromFebruary 1

to December 31,

Period fromJanuary 1

to January 31,Year Ended

December 31,(In millions) 2006 2006 2005 2004Income tax provision at statutory rate . . . . . . . . . . . . . . $ 15 $ 7,998 $(7,410) $(602)State income taxes, net of federal income tax benefit . 1 423 (416) (28)Nondeductible employee meals. . . . . . . . . . . . . . . . . . . . 9 1 11 9Medicare Part D Subsidy . . . . . . . . . . . . . . . . . . . . . . . . . (12) (2) (17) —Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (8,488) 7,830 640Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . 5 — — —Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 68 2 (19)

$ 21 $ — $ — $ —

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Temporary differences and carry forwards that give rise to a significant portion of deferred tax assetsand liabilities at December 31, 2006 and 2005 were as follows:

Successor PredecessorDecember 31, 2006 December 31, 2005

DeferredTax

DeferredTax

DeferredTax

DeferredTax

(In millions) Assets Liabilities Assets LiabilitiesEmployee benefits, including postretirement, medical and

ESOP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,416 $ — $ 5,471 $ 29Depreciation, capitalized interest and other . . . . . . . . . . . . . . . — 3,139 — 3,434Federal and state net operating loss carry forwards. . . . . . . . . 2,709 — 2,688 —Mileage Plus deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . 1,242 — 47 —Gains on sale and leasebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 9 69 —Aircraft rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 46 525 —AMT credit carry forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291 — 294 —Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 964 19 —Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 — 4,482 —Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,802 1,843 1,522 1,483

Less: Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,248) — (10,618) —$ 5,435 $6,001 $ 4,499 $4,946

As a result of the Company’s emergence from bankruptcy, the Company has an unrealized tax benefitof $782 million at December 31, 2006, resulting from an excess tax deduction of $2.1 billion. The excess taxdeduction represents the difference between the total tax deduction available, which is equal to the fairvalue of the common stock issued to certain unsecured creditors and employees pursuant to the Plan ofReorganization, and the amount of the deduction attributable to the amount expensed, which is the valueof the stock determined in the Plan of Reorganization. The Company has accounted for the excess taxdeduction by analogy to SFAS 123R and will recognize this deduction when it is realized as a reduction oftaxes payable.

At December 31, 2006, UAL Corporation and its subsidiaries had $291 million of federal AMTcredits. Additionally, the Company has $2.4 billion of federal tax benefits and $271 million of state taxbenefits, relating to net operating losses which may be carried forward to reduce the tax liabilities of futureyears. This tax benefit is mostly attributable to federal NOL carry forwards of $7.0 billion. If not utilized,the federal tax benefits of $1.1 billion expire in 2022, $0.4 billion expire in 2023, $0.5 billion expire in 2024and $0.4 billion expire in 2025. In addition, the state tax benefit, if not utilized, expires over a five to twentyyear period.

At December 31, 2006, the federal and state net operating loss (“NOL”) carry forward was reduced bydischarge of indebtedness income of $1.3 billion resulting from bankruptcy-related negotiations. At thistime, the Company does not believe that the limitations imposed by the Internal Revenue Code on theusage of the NOL carry forward and other tax attributes following an ownership change will have an effecton the Company. Therefore, the Company does not believe its exit from bankruptcy has had any materialimpact on the utilization of its remaining NOL carry forward and other tax attributes.

The Company’s management assesses the realizability of its deferred tax assets, and records avaluation allowance for the deferred tax assets when it is more likely than not that a portion, or all of thedeferred tax assets, will not be realized. The ultimate realization of deferred tax assets is dependent uponthe generation of future taxable income (including the reversals of deferred tax liabilities) during theperiods in which those temporary differences will become deductible. As such, the Company has avaluation allowance against its deferred tax assets as of December 31, 2006 and 2005, to reflectmanagement’s assessment regarding the realizability of the deferred tax assets. The Company expects tocontinue to maintain a valuation allowance on deferred tax assets until other positive evidence is sufficient

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to justify realization. With the adoption of fresh-start reporting, a valuation allowance of $2,310 millionwas established which, if reversed in future periods, will be allocated to reduce goodwill and then otherintangible assets.

(7) InvestmentsThe Company had cost method investments of $91 million and $5 million at December 31, 2006 and

2005, respectively. The Company revalued its investments to their estimated fair values as of the EffectiveDate in accordance with SOP 90-7. Since that time, there have been no triggering events that required theCompany to evaluate any of these investments for impairment.

On September 29, 2004, Cendant and Orbitz announced their planned merger. Cendant offered toacquire all of the outstanding common stock of Orbitz for cash. The Company entered into a stockholderagreement to tender its shares. After Bankruptcy Court approval, United tendered all of its shares inOrbitz for $185 million in cash, resulting in a gain of $158 million.

(8) Retirement and Postretirement PlansHistorically, the Company has maintained various retirement plans, both defined benefit (qualified

and non-qualified) and defined contribution, which have covered substantially all employees. TheCompany also has provided certain health care benefits, primarily in the U.S., to retirees and eligibledependents, as well as certain life insurance benefits to certain retirees reflected as “Other Benefits” in thetables below. The Company has reserved the right, subject to collective bargaining agreements, to modifyor terminate the health care and life insurance benefits for both current and future retirees.

Upon emergence from bankruptcy on February 1, 2006, the Company completed a revaluation of thepostretirement liabilities resulting in a reduction of the net accumulated benefit obligation ofapproximately $28 million. In accordance with SOP 90-7 upon emergence, the Company also acceleratedthe recognition of net unrecognized actuarial gains and losses, prior service costs and transition obligationpertaining to its foreign pension plans and postretirement plans upon emergence, and recorded areorganization expense thereon. The unrecognized costs as of January 31, 2006 that were recognized aspart of fresh-start reporting are reported in the table below.

With the termination of the Company’s domestic defined benefit retirement plans, the Companyhas reached agreements with all of its employee groups to implement replacement plans, largely definedcontribution plans. See “Defined Contribution Plans,” below, for further information.

On December 30, 2004, the PBGC filed a complaint against the Company in the District Court to seekthe involuntary termination of the Pilot Plan, with benefit accruals terminated effective December 30,2004. The Company recorded a $152 million curtailment charge in the fourth quarter of 2004 relating tothe PBGC’s involuntary termination action and reclassified the associated pension obligations of$2.5 billion to Liabilities subject to compromise.

In April 2005, United and the PBGC entered into a global settlement agreement which provided forthe settlement and compromise of various disputes and controversies with respect to these pension plans.In May 2005, the Bankruptcy Court approved the settlement agreement, including modifications requestedby certain creditors.

The PBGC assumed responsibility for the assets of the Ground Plan effective May 23, 2005 (with atermination date of March 11, 2005), the Flight Attendant and the MAPC Plans effective June 30, 2005and the Pilot Plan effective October 26, 2005, and the Company has no further duties or rights with respectto these plans. On March 17, 2006, the Bankruptcy Court ruled that the Company’s obligations regardingnon-qualified benefits that were earned under the Pilot Plan ceased on January 31, 2006. See Note 1,“Voluntary Reorganization Under Chapter 11—Significant Matters Remaining to be Resolved inChapter 11 Cases,” items (c) and (d), for further details on Plan termination matters still pending inlitigation. In 2005, the Company recorded an additional $640 million in curtailment charges related tothese Pension Plans and reclassified an additional $1.9 billion of pension obligations to Liabilities subject

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to compromise. The Company also recorded approximately $7.2 billion of PBGC allowable claims inLiabilities subject to compromise in accordance with the confirmed Plan of Reorganization. In addition,the Company recognized net settlement losses of approximately $1.1 billion in 2005 in accordance withSFAS 88.

As part of fresh-start reporting, the Company also adjusted its remaining retirement plan obligationsto fair value. See Note 1, “Voluntary Reorganization Under Chapter 11—Fresh-Start Reporting,” formore information.

The following table sets forth the reconciliation of the beginning and ending balances of the benefitobligation and plan assets, the funded status and the amounts recognized in the Statements of Consolidated

Financial Position for the defined benefit and other postretirement plans (“Other Benefits”) as ofDecember 31 (utilizing a measurement date of December 31):

Pension Benefits Other BenefitsSuccessor Predecessor Successor Predecessor

(In millions)

Period fromFebruary 1 toDecember 31,

2006

Period fromJanuary 1

to January 31,2006

Year EndedDecember 31,

2005

Period fromFebruary 1 toDecember 31,

2006

Period fromJanuary 1

to January 31,2006

Year EndedDecember 31,

2005Change in Benefit Obligation

Benefit obligation at beginning ofperiod . . . . . . . . . . . . . . . . . . . . . . . $247 $ 241 $ 13,618 $ 2,223 $ 2,256 $ 2,401

Service cost . . . . . . . . . . . . . . . . . . . . . 9 1 79 33 3 42Interest cost . . . . . . . . . . . . . . . . . . . . 8 1 464 116 11 131Plan participants’ contributions . . . . . 1 — 1 52 4 46Amendments. . . . . . . . . . . . . . . . . . . . — — — — — (16)Actuarial (gain) loss . . . . . . . . . . . . . . (9) 2 706 (123) (32) (136)Curtailments . . . . . . . . . . . . . . . . . . . . — — (450) — — —Foreign currency exchange rate

changes. . . . . . . . . . . . . . . . . . . . . . 8 3 (26) — — —Termination of domestic benefit

plans . . . . . . . . . . . . . . . . . . . . . . . . — -— (13,580) — — —Federal subsidy . . . . . . . . . . . . . . . . . . — — — 9 — —Gross benefits paid . . . . . . . . . . . . . . . (13) (1) (571) (194) (19) (212)Benefit obligation at end of period . . . $251 $ 247 $ 241 $ 2,116 $ 2,223 $ 2,256

Change in Plan Assets

Fair value of plan assets at beginningof period. . . . . . . . . . . . . . . . . . . . . $136 $ 132 $ 7,213 $ 116 $ 116 $ 117

Actual return on plan assets . . . . . . . . 12 2 168 3 1 5Employer contributions . . . . . . . . . . . 11 1 61 77 14 160Plan participants’ contributions . . . . . 1 — 1 52 4 46Foreign currency exchange rate

changes. . . . . . . . . . . . . . . . . . . . . . 5 2 (9) — — —Expected transfer out . . . . . . . . . . . . . — — (3) — — —Termination of domestic benefits

plans . . . . . . . . . . . . . . . . . . . . . . . . — — (6,728) — — —Benefits paid . . . . . . . . . . . . . . . . . . . . (13) (1) (571) (194) (19) (212)Fair value of plan assets at end of

period . . . . . . . . . . . . . . . . . . . . . . . $152 $ 136 $ 132 $ 54 $ 116 $ 116

Funded status . . . . . . . . . . . . . . . . . . . $ (99) $(111) $ (109) $(2,062) $(2,107) $(2,140)Unrecognized actuarial (gains)

losses . . . . . . . . . . . . . . . . . . . . . . . (a) 43 38 (a) 1,600 1,640Unrecognized prior service costs . . . . (a) 1 1 (a) (1,531) (1,544)Unrecognized net transition

obligation . . . . . . . . . . . . . . . . . . . . (a) 3 4 (a) — —

Net amount recognized. . . . . . . . . . . . $ (99) $ (64) $ (66) $(2,062) $(2,038) $(2,044)

(a) Amounts are not applicable due to the adoption of SFAS 158, which only permits prospective adoption and eliminates theaccounting requirements for the recognition of additional minimum liability and intangible assets.

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Pension Benefits Other BenefitsSuccessor Predecessor Successor Predecessor

Year EndedDecember 31,

Year EndedDecember 31,

2006 2005 2006 2005Amounts recognized in the Statements of

Consolidated Financial Position consist of:Prepaid (accrued) benefit cost . . . . . . . . . . . . . . . . . . . . . . $ — $ (66) $ — $(2,044)Non-current asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 (a) — (a)Current liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (a) (107) (a)Non-current liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (130) (a) (1,955) (a)Additional minimum liability . . . . . . . . . . . . . . . . . . . . . . . (a) (16) (a) —Intangible asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (a) 4 (a) —Accumulated other comprehensive income. . . . . . . . . . . (a) 12 (a) —Net amount recognized. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (99) $ (66) $(2,062) $(2,044)

Amounts recognized in Accumulated OtherComprehensive Income consist of:Net actuarial gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13 (a) $ 120 (a)Increase (decrease) in minimum liability . . . . . . . . . . . . . (a) $(3,456) (a) —

(a) Amounts are not applicable due to the adoption of SFAS 158, which only permits prospectiveadoption and eliminates the accounting requirements for the recognition of additional minimumliability and intangible assets. Amounts recognized as of December 31, 2005 represent the net ofcurrent and non-current plan assets and obligations.

The following information relates to all pension plans with an accumulated benefit obligation and aprojected benefit obligation in excess of plan assets:

December 31(In millions) 2006 2005Projected benefit obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $231 $214Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 183Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 83

The net periodic benefit cost included the following components:

Successor Predecessor

(In millions)

Period fromFebruary 1 toDecember 31,

Period fromJanuary 1

to January 31,Year Ended

December 31,Pension Benefits 2006 2006 2005 2004Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9 $ 1 $ 79 $ 242Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . 8 1 464 789Expected return on plan assets . . . . . . . . . (8) (1) (392) (710)Amortization of prior service cost

including transition obligation . . . . . . . — — 21 85Curtailment charge . . . . . . . . . . . . . . . . . . . — — 640 152Settlement losses, net . . . . . . . . . . . . . . . . . — — 1,067 —Recognized actuarial loss. . . . . . . . . . . . . . — — 100 93Net periodic benefit costs. . . . . . . . . . . . . . $ 9 $ 1 $1,979 $ 651

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Successor Predecessor

(In millions)

Period fromFebruary 1 toDecember 31,

Period fromJanuary 1

to January 31,Year Ended

December 31,Other Benefits 2006 2006 2005 2004Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33 $ 3 $ 42 $ 42Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . 116 11 131 151Expected return on plan assets . . . . . . . . . . (6) (1) (9) (9)Amortization of prior service cost

including transition obligation . . . . . . . . — (13) (149) (125)Recognized actuarial loss. . . . . . . . . . . . . . . — 8 93 89Net periodic benefit costs. . . . . . . . . . . . . . . $ 143 $ 8 $ 108 $ 148

The estimated amounts that will be amortized from accumulated other comprehensive income intonet periodic benefit cost in 2007 for actuarial gains are $1 million for pension plans and $8 million forother postretirement plans.

The assumptions below are based on country-specific bond yields and other economic data, whichchanged significantly as a result of the termination of several of the Company sponsored pension plans in2005. The weighted-average assumptions used for the benefit plans were as follows:

Pension Benefits Other BenefitsAt

January 31,At

December 31,At

January 31,At

December 31,2006 2006 2005 2006 2006 2004

Weighted-average

assumptions used to

determine benefit

obligations

Discount rate. . . . . . . . . . . 3.63% 3.88% 3.56% 5.84% 5.93% 5.68%Rate of compensation

increase . . . . . . . . . . . . . 2.50% 3.15% 3.43% — — —

Period fromJanuary 1

toJanuary 31,

2006

Period fromFebruary 1

toDecember 31,

2006

Year EndedDecember 31,

2005

Period fromJanuary 1

toJanuary 31,

2006

Period fromFebruary 1

toDecember 31,

2006

Year EndedDecember 31,

2004Weighted-average

assumptions used to

determine net expense

Discount rate. . . . . . . . . . . 3.56% 3.63% 5.77% 5.68% 5.84% 5.83%Expected return on plan

assets . . . . . . . . . . . . . . . 6.49% 6.49% 8.94% 8.00% 8.00% 8.00%Rate of compensation

increase . . . . . . . . . . . . . 2.47% 2.50% 3.43% — — —

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The expected return on plan assets is based on an evaluation of the historical behavior of the broadfinancial markets and the Company’s investment portfolio, taking into consideration input from the plans’investment consultant and actuary regarding expected long-term market conditions and investmentmanagement performance.

2006 2005Health care cost trend rate assumed for next year. . . . . . . . . . . . . . . . . . . 8.50% 9.50%Rate to which the cost trend rate is assumed to decline (ultimate trend

rate in 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.50% 4.50%

Assumed health care cost trend rates have a significant effect on the amounts reported for the healthcare plan. A 1% change in assumed health care trend rate for the January 2006 Predecessor period wouldhave increased (decreased) aggregate service cost and interest cost, by $1 million and $(1) million,respectively. A 1% change in the assumed health care trend rate for the Successor Company would havethe following additional effects:

(In millions) 1% Increase 1% DecreaseEffect on total service and interest cost for the eleven

months ended December 31, 2006 . . . . . . . . . . . . . . . . . . . . $ 16 $ (13)Effect on postretirement benefit obligation at December 31,

2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $202 $(175)

The weighted-average asset allocations for the plans at December 31, 2006 and 2005, by asset categoryare as follows:

Pension Assets Other Benefit Assetsat December 31, at December 31,

Asset Category 2006 2005 2006 2005Equity securities. . . . . . . . . . . . . . . . . . . . . . . . . . . 71% 62% —% —%Fixed income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 33 100 100Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 — —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100% 100% 100%

The Company believes that the long-term asset allocations on average will approximate the targetedallocations and regularly reviews the actual asset allocations to periodically rebalance the investments tothe targeted allocations when appropriate. The target asset allocations are established with the objective ofachieving the plans’ expected return on assets without undue investment risk.

Expected 2007 contributions are $14 million for the pension plans and $173 million for the otherpostretirement benefit plans. The following benefit payments are expected to be made in future years forthe Company’s retirement plans:

(In millions) PensionOther

BenefitsOther Benefits—subsidy receipts

2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9 $174 $ (13)2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 175 (15)2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 176 (16)2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 175 (18)2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 175 (20)Years 2012-2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $62 $838 $(129)

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The following table illustrates the incremental effect of applying SFAS 158 on individual line items inthe Statements of Consolidated Financial Position at December 31, 2006:

(In millions)Before

ApplicationIncrease/

(Decrease)After

ApplicationNon-current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27 $ 4 $ 31Non-current pension benefit liability . . . . . . . . . . . 2,215 (130) 2,085Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . — 47 47Accumulated other comprehensive income . . . . . — 87 87

Defined Contribution Plans

In place of the domestic defined benefit pension plans that were terminated during bankruptcy, theCompany enhanced its contributions to the defined contribution plans for most employee groups.Contributions are based on matching percentages, years of service and/or eligible earnings. The Company’scontribution percentages vary from 2% to 15% of eligible earnings depending on the terms of each plan.The Company agreed to contribute to most of its defined contribution plans effective in June andJuly 2005, although such contributions for 2005 were not funded until shortly after the Effective Date.

Effective March 1, 2006, an International Association of Machinists (“IAM”) replacement plan wasimplemented. The IAM replacement plan is a multi-employer plan whereby the assets contributed by theCompany (based on hours worked) may be used to provide benefits to employees of other participatingcompanies, since assets contributed by all participating companies are not segregated or restricted toprovide benefits specifically to employees of one participating company. In accordance with the applicableaccounting for multi-employer plans, the Company would only recognize a withdrawal obligation if itbecomes probable it would withdraw from the plan. The Predecessor Company recorded expense fromdefined contribution plans of $16 million for the month of January 2006 and $122 million and $92 millionfor the years ended December 31, 2005 and 2004, respectively. The Successor Company recognized$206 million of expense for the eleven months ended December 31, 2006 for all of the Company’s definedcontribution employee retirement plans, of which $21 million related to the IAM multi-employer plan.

(9) Segment Information

Segments. The Company manages its business by two reportable segments: mainline and UnitedExpress. In 2006, in light of the Company’s bankruptcy-related restructuring and organizational changes,management reevaluated the Company’s segment reporting. As a result, management determined that thegeographic regions and ULS, which were previously reported as segments, are no longer reportablesegments requiring disclosure under SFAS 131. UAL now manages its business as an integrated networkwith assets deployed across various regions, whereas in the past United focused its business managementdecisions within specific geographic regions and services instead of as an integrated network. This newapproach seeks to allocate resources to maximize the profitability of the overall airline network.

The accounting policies for each of these segments are the same as those described in Note 2,“Summary of Significant Accounting Policies,” except that segment financial information has beenprepared using a management approach which is consistent with how the Company internally dispersesfinancial information for the purpose of making internal operating decisions. The Company evaluatessegment financial performance based on earnings before income taxes, special items, reorganization items,and gain on sale of investments. As discussed in the notes to the tables below, the Company does notallocate corporate overhead expenses to its United Express segment. Certain selling and operational costsare allocated to United Express. See Note 2(i), “Summary of Significant Accounting Policies—UnitedExpress” for additional information related to United Express expenses.

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The following table includes financial information, which has been restated from prior periodpresentation to conform to the Company’s new mainline and United Express segments, for the elevenmonth period ended December 31, 2006, the one month period ended January 31, 2006 and the yearsended December 31, 2005 and 2004:

Successor PredecessorFebruary 1 to January 1 to Year EndedDecember 31, January 31, December 31,

(In millions) 2006 2006 2005 2004Revenue:

Mainline . . . . . . . . . . . . . . . . . . . . . $15,185 $ 1,254 $ 14,950 $14,460United Express . . . . . . . . . . . . . . . 2,697 204 2,429 1,931

Total . . . . . . . . . . . . . . . . . . . . . . $17,882 $ 1,458 $ 17,379 $16,391

Depreciation and amortization:Mainline(a). . . . . . . . . . . . . . . . . . . $ 820 $ 68 $ 856 $ 874United Express(a) . . . . . . . . . . . . . 7 1 17 21

Segment earnings (loss) andreconciliation to Statements of

Consolidated Operations:Mainline . . . . . . . . . . . . . . . . . . . . . $ (89) $ (59) $ (240) $ (779)United Express . . . . . . . . . . . . . . . 101 (24) (317) (494)Reorganization items, net . . . . . . — 22,934 (20,601) (611)Gain on sale of investments

(Note 7). . . . . . . . . . . . . . . . . . . . — — — 158Special items (Note 19) . . . . . . . . 36 — (18) 5Taxes on equity earnings(b). . . . . (2) — — —

Consolidated earnings (loss) beforeincome taxes (except on equityearnings)(b) . . . . . . . . . . . . . . . . . . $ 46 $22,851 $(21,176) $ (1,721)

(a) United Express depreciation expense relates to assets used in United Express operations. Thisdepreciation is included in Regional affiliates expense in the Company’s Statements of Consolidated

Operations.

(b) Equity earnings are part of the mainline segment. Accordingly, the pre-tax equity earnings areincluded in the mainline segment results. Income taxes on equity earnings are subtracted fromsegment earnings to reconcile the sum of pre-tax income and equity earnings, which is presented netof tax in the Statements of Consolidated Operations.

The Company does not allocate interest income or interest expense to the United Express segment inreports used to evaluate segment performance. Therefore, all amounts classified as interest income andinterest expense in the Statements of Consolidated Operations relate to the mainline segment.

In accordance with SFAS 142, on the Effective Date the Company allocated goodwill upon adoptionof fresh-start reporting in a manner similar to how the amount of goodwill recognized in a businesscombination is determined. This required the determination of the fair value of each reportable segmentto calculate an estimated purchase price for such segment. This purchase price was then allocated to theindividual assets and liabilities assumed to be related to that segment. Any excess purchase price is theamount of goodwill assigned to that segment. To the extent that individual assets and liabilities could beassigned directly to specific segments, those assets and liabilities were so assigned. This process wasperformed based on the Company’s reportable segments at the time, which consisted of the ULS, North

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America, Pacific, Atlantic, and Latin America segments, and resulted in the allocation of goodwill of$2.7 billion to the Pacific, Latin America and ULS segments.

The Company performed its annual goodwill impairment test for goodwill at these segments anddetermined that there was no impairment of goodwill. Subsequently, after concluding that the Company’sreportable segments are mainline and United Express, a SFAS 141 goodwill allocation process wasperformed, as described above, and determined that all of the Company’s goodwill of $2.7 billion is withinthe mainline segment. Based on the timing of this analysis the Company also concluded there is noimpairment of goodwill allocated to the new mainline segment. During the eleven months endedDecember 31, 2006, Successor Company goodwill decreased by $62 million as discussed in Note 2(k),“Summary of Significant Accounting Policies—Intangibles.”

At December 31, 2006 and 2005, the net carrying values of mainline and United Express segmentassets were as follows:

(In millions) 2006 2005Mainline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,294 $19,126United Express. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 216

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,369 $19,342

United Express assets include only those assets directly associated with its operations. The Companydoes not allocate corporate assets to the United Express segment.

Operating revenue by principal geographic region (as defined by the U.S. Department ofTransportation) for the eleven month period ended December 31, 2006, the one month period endedJanuary 31, 2006 and the years ended December 31, 2005 and 2004 is presented in the table below. Priorperiods have been restated to conform to the 2006 presentation as a result of the new reporting segmentsdetermined in 2006.

Successor PredecessorFebruary 1 to January 1 to Year EndedDecember 31, January 31, December 31,

(In millions) 2006 2006 2005 2004Domestic (U.S. and Canada). . . . . . . . $11,981 $ 953 $11,411 $11,048Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,214 283 3,283 2,837Atlantic . . . . . . . . . . . . . . . . . . . . . . . . . . 2,158 167 2,189 2,076Latin America . . . . . . . . . . . . . . . . . . . . 529 55 496 430

Total . . . . . . . . . . . . . . . . . . . . . . . . . . $17,882 $1,458 $17,379 $16,391

The Company attributes revenue among the geographic areas based upon the origin and destinationof each flight segment. United’s operations involve an insignificant level of dedicated revenue-producingassets in geographic regions as the overwhelming majority of the Company’s revenue producing assets(primarily U.S. registered aircraft) generally can be deployed in any of its geographic regions, as any givenaircraft may be used in multiple geographic regions on any given day.

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(10) Accumulated Other Comprehensive Income (Loss)

The table below presents the components of accumulated other comprehensive income (loss), net oftax. See Note 8, “Retirement and Postretirement Plans” and Note 14, “Financial Instruments and RiskManagement,” for further information on these items.

As of December 31,(In millions) 2006 2005 2004Minimum pension liability, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $— $(12) $(3,311)Adoption of SFAS 158, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 — —Derivative losses, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) (24) (21)Accumulated other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . . $82 $(36) $(3,332)

(11) Debt Obligations

During 2006, in accordance with the Plan of Reorganization, the Company issued new debt, enteredinto the Credit Facility, reinstated certain secured aircraft debt and entered into other debt agreementsnegotiated during the bankruptcy process (including aircraft financings). See the “Predecessor CompanyDebt” section below as certain debt was included in Liabilities subject to compromise in the Statements ofConsolidated Financial Position at December 31, 2005. The Company also repaid the DIP Financing in itsentirety. Long-term debt amounts outstanding at December 31, 2006 and 2005 are shown below:

Successor PredecessorAt December 31,

(In millions) 2006 2005Secured notes, 5.38% to 9.52%, due 2007 to 2019. . . . . . . . . . $ 5,225 $ 154DIP Financing, 8.6%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,157Credit Facility, 9.12% and 9.125%, due 2012 . . . . . . . . . . . . . . 2,786 —Limited-Subordination Notes, 4.5%, due 2021 . . . . . . . . . . . . 726 —6% senior notes, due 2031 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 —5% senior convertible notes, due 2021. . . . . . . . . . . . . . . . . . . . 150 —Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,387 1,311

Less: unamortized debt discount . . . . . . . . . . . . . . . . . . . . . . (247) —Less: current portion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,687) (13)

Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . . . $ 7,453 $1,298

Successor Company Debt

Credit Facility. On the Effective Date, United entered into the Credit Facility provided by asyndicate of banks and other financial institutions led by J.P. Morgan Securities Inc. and Citicorp GlobalMarkets Inc., as joint lead arrangers and joint book runners; JPMorgan Chase Bank, N.A. (“JPMCB”) andCiticorp USA, Inc. (“CITI”), as co-administrative agents and co-collateral agents; General Electric CapitalCorporation, as syndication agent; and JPMCB as paying agent. The Credit Facility provided for a totalcommitment of up to $3.0 billion that comprised two separate tranches: (i) Tranche A consisted of up to$200 million revolving commitment available for Tranche A loans and for standby letters of credit to beissued in the ordinary course of business of United or one of its subsidiary guarantors; and (ii) Tranche Bconsisted of a term loan commitment of up to $2.45 billion available at the time of closing and additionaldelayed draw term loan commitments of up to $350 million available upon, among other things, United’sacquiring unencumbered title to some or all of the 14 airframes and related engines that were subject toUnited’s 1997-1 EETC financing. The Credit Facility would have matured on February 1, 2012 but wassubsequently amended in February 2007, as explained below.

Borrowings under the Credit Facility were at a floating interest rate based on either a base rate, or at ouroption, a LIBOR rate, plus an applicable margin of 2.75% in the case of the base rate loans and 3.75% inthe case of the LIBOR loans. The Tranche B term loan required regularly scheduled semi-annualpayments of principal equal to 0.5% of the original principal amount of the Tranche B term loan. Interest

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was payable on the last day of the applicable interest period but in no event less than quarterly. InMarch 2006, the Company entered into an interest rate swap to mitigate its exposure to increases ininterest rates under the $2.45 billion term loan. In January 2007, as a result of changes in the Company’smix of fixed-rate and variable-rate debt, the Company terminated this swap. For further details, seeNote 14, “Financial Instruments and Risk Management—Interest Rate Swap.”

United’s obligations under the Credit Facility were unconditionally guaranteed by UAL and certain ofthe direct and indirect domestic subsidiaries of the Company, other than certain immaterial subsidiaries(the “Guarantors”), and were secured by a security interest in substantially all of the tangible andintangible assets of the Guarantors. The obligations under the Credit Facility were also secured by a pledgeof the capital stock of United and the direct and indirect subsidiaries of UAL Corporation and United,except that a pledge of any first-tier foreign subsidiary was limited to 65% of the stock of such subsidiaryand such foreign subsidiaries were not required to pledge the stock of their subsidiaries.

The Credit Facility contained covenants that limited the ability of United and the Guarantors to,among other things, incur or guarantee additional indebtedness, create liens, pay dividends on orrepurchase stock, make certain types of investments, pay dividends or other payments from United’s director indirect subsidiaries, enter into transactions with affiliates, sell assets or merge with other companies,modify corporate documents or change lines of business. The Credit Facility also required compliance withseveral financial covenants: (i) a minimum ratio of earnings before interest, taxes, depreciation andamortization and aircraft rent (“EBITDAR”) to the sum of cash interest expense, cash aircraft rent (otherthan capitalized leases) and scheduled debt payments; (ii) a minimum unrestricted cash balance of$1.2 billion; and (iii) the market value of the collateral had to be greater than 150% of the sum of (a) theaggregate outstanding amount of the loans plus (b) the undrawn amount of outstanding letters of credit,plus (c) the unreimbursed amount of drawings under any letters of credit, and (d) the termination value ofcertain interest rate protection and hedging agreements with the exit lenders and their affiliates. TheCredit Facility received a rating of B+ from Standard & Poor’s and B1 from Moody’s Investment Services.

United used all $2.45 billion of the available borrowings under Tranche B and $161 million of the$200 million available under Tranche A of the Credit Facility at the Effective Date to finance workingcapital needs and for other general corporate purposes, including repayment of the borrowingsoutstanding under the DIP Financing. Subsequently, in 2006 the Company repaid $161 million on therevolving credit line borrowings and accessed the remaining $350 million of the delayed draw term loan.

As of December 31, 2006, the Company had outstanding borrowings of $2.8 billion of which$2,438 million was subject to an interest rate of 9.12% with the remaining balance of $348 million at9.125%. In addition, letters of credit were issued under the Credit Facility in an aggregate amount of$63 million subject to an interest rate of 3.75%. The Company was in compliance with the Credit Facilitycovenants at December 31, 2006.

Amended Credit Facility. On February 2, 2007, the Company prepaid $972 million of its CreditFacility debt and entered into an amended and restated revolving credit, term loan and guarantyagreement (the “Amended Credit Facility”) that, among other things, reduced the size of the facility from$3.0 billion to $2.055 billion, reduced the applicable interest rates, and provided for a more limitedcollateral package and a relaxation of certain restrictive covenants. There were no prepayment penaltiesassociated with this debt retirement. In the first quarter of 2007, the Company expects to expenseapproximately $16 million of deferred financing costs which are related to the portion of the Credit Facilityprepaid in 2007 and included in other assets on the December 31, 2006 Statements of ConsolidatedFinancial Position.

The Amended Credit Facility was provided by a syndicate of banks and other financial institutions ledby J.P. Morgan Securities Inc. and Citicorp Global Markets, Inc., as joint lead arrangers and jointbookrunners: JPMCB and CITI, as co-administrative agents and co-collateral agents, Credit SuisseSecurities (USA) LLC, as syndication agent, and JPMCB, as paying agent. The Amended Credit Facility

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provides for a total commitment of up to $2.055 billion, comprised of two separate tranches: (i) a TrancheA consisting of $255 million revolving commitment available for Tranche A loans and standby letters ofcredit and (ii) a Tranche B consisting of a term loan commitment of $1.8 billion available at the time ofclosing. The Tranche A loans mature on February 1, 2012, and the Tranche B loans mature on February 1,2014.

Borrowings under the Amended Credit Facility bear interest at a floating rate, which, at theCompany’s option, can be either a base rate or a LIBOR rate, plus an applicable margin of 1.0% in thecase of base rate loans, and 2.0% in the case of LIBOR loans. The Tranche B term loan requires regularlyscheduled semi-annual payments of principal equal to $9 million. Interest is payable at least every threemonths. The Company may prepay some or all of the Tranche B loans from time to time, at a price equalto 100% of the principal amount prepaid plus accrued and unpaid interest, if any, to the date ofprepayment, but without penalty or premium.

United’s obligations under the Amended Credit Facility are unconditionally guaranteed by UALCorporation and certain of its direct and indirect domestic subsidiaries, other than certain immaterialsubsidiaries (the “Guarantors”); hereafter, Guarantors refers to the guarantor companies as defined by theAmended Credit Facility. On the closing date for the Amended Credit Facility, the obligations are securedby a security interest in the following tangible and intangible assets of United and the Guarantors: (i) thePacific (Narita, China and Hong Kong) and Atlantic (Heathrow) routes (the “Primary Routes”),(ii) primary foreign slots, primary domestic slots, certain gate interests in domestic airport terminals andcertain supporting route facilities, (iii) certain spare engines, (iv) certain quick engine change kits,(v) certain owned real property and related fixtures, and (vi) certain flight simulators (the “Collateral”).After the closing date, and subject to certain conditions, United and the Guarantors may grant a securityinterest in the following assets, in substitution for certain Collateral (which may be released from the lienin support of the Amended Credit Facility upon the satisfaction of certain conditions): (a) certain aircraft,(b) certain spare parts, (c) certain ground handling equipment, and (d) accounts receivable.

The Amended Credit Facility contains covenants that will limit the ability of United and theGuarantors to, among other things, incur or guarantee additional indebtedness, create liens, pay dividendson or repurchase stock, make certain types of investments, enter into transactions with affiliates, sell assetsor merge with other companies, modify corporate documents or change lines of business. The AmendedCredit Facility also requires compliance with the following financial covenants: (i) a minimum ratio ofEBITDAR to the sum of cash interest expense, aircraft rent and scheduled debt payments, (ii) a minimumunrestricted cash balance of $750 million, and (iii) a minimum ratio of market value of collateral to thesum of (a) the aggregate outstanding amount of the loans plus (b) the undrawn amount of outstandingletters of credit, plus (c) the unreimbursed amount of drawings under such letters of credit and (d) thetermination value of certain interest rate protection and hedging agreements with the Amended CreditFacility lenders and their affiliates, of 150% at any time, or 200% at any time following the release ofPrimary Routes having an appraised value in excess of $1 billion (unless the Primary Routes are the onlycollateral then pledged). Failure to comply with the Amended Credit Facility covenants could result in adefault under the Amended Credit Facility unless the Company were to obtain a waiver of, or otherwisemitigate or cure, the default. Additionally, the Amended Credit Facility contains a cross-default provisionwith respect to other credit arrangements that exceed $50 million. A default could result in a terminationof the Amended Credit Facility and a requirement to accelerate repayment of all outstanding facilityborrowings.

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Limited-Subordination Notes. As discussed in Note 1, “Voluntary Reorganization UnderChapter 11—Bankruptcy Considerations,” after the Effective Date the Company reached an agreementwith five of the seven eligible employee groups to modify certain terms of these notes.

In July 2006, the Company issued $726 million aggregate principal amount of 4.5% senior limited-subordination convertible notes to irrevocable trusts established for the benefit of certain of its employees,including employees under collective bargaining agreements. The notes are unsecured, mature on June 30,2021 and do not require any payment of principal before maturity. Interest is payable semi-annually, inarrears. Interest for the first year may be paid in shares of common stock, at the option of the Company.These notes may be converted into common stock of the Successor Company at any time after October 23,2006, at an initial conversion price of $34.84 which may be subject to adjustment for certain dilutive itemsand events. The notes are junior, in right of payment upon liquidation, to the Company’s obligations underthe 5% senior convertible notes and 6% senior notes discussed below in “Newly-issued Debt.” The notesare callable in cash and/or Successor Company common stock beginning approximately five years after theissuance date, except that the Company may elect to pay in common stock only if the common stock hastraded at not less than 125% of the conversion price for the 60 consecutive trading days immediatelybefore the redemption date. In addition, on each of June 30, 2011 and June 30, 2016, holders have theoption to require the Company to repurchase its notes, which the Company may elect to do through thepayment of cash or Successor Company common stock, or a combination of both.

Pursuant to the Plan of Reorganization, the notes were to have been issued at a conversion price of$46.86, which was calculated as 125% of the average closing common stock price for the 60 consecutivetrading days following February 1, 2006. The Plan of Reorganization also required that the notes bearinterest at a rate so that the notes would trade at par upon issuance. Since the original conversion optionwas priced significantly out of the money as of the note issuance date of July 25, 2006, the Company agreedwith employee groups to modify the conversion price to make the notes more marketable and to provideUnited with a more favorable interest rate. This modification did not alter or eliminate the requirementthat an interest rate be selected so that the notes would trade at par upon issuance. Had the Company notmodified the conversion price, the interest rate required to meet the par trading requirement would havebeen significantly higher than 4.5%.

The Company accounted for this modification of debt in accordance with EITF Issue No. 96-19,“Debtor’s Accounting for a Modification or Exchange of Debt Instruments” and EITF Issue No. 05-7,“Accounting for Modifications to Conversion Options Embedded in Debt Instruments and Related Issues.”

The Company evaluated the original and modified terms of this debt instrument (including performing afair valuation of the conversion feature before and after the modification), and determined that themodification qualified to be accounted for as an extinguishment of debt. As a result, the modified Limited-Subordination Notes were recorded at fair market value on their date of issuance, which approximated thebook value of the original extinguished notes, and no gain or loss was realized on the extinguishment. TheCompany had recorded the original obligation to issue the Limited-Subordination Notes at fair marketvalue upon its emergence from bankruptcy in accordance with fresh-start reporting.

After the issuance of the modified notes in July 2006, the trusts sold the notes to third parties andremitted the majority of the proceeds to the employee beneficiaries in 2006 with the remainder to beremitted in 2007.

Newly-issued Debt. In addition to the mandatorily convertible preferred securities discussed inNote 13, “Preferred Stock,” the Company issued the following new debt instruments on the Effective Date:

• 5% senior convertible notes were issued to certain holders of the O’Hare municipal bonds. Thenotes are unsecured, have a term of 15 years from the date of issuance and do not require anypayment of principal before maturity. Interest is payable semi-annually, in arrears. Interest for thefirst year may be paid in kind, at the option of the Company, in Successor Company common stock.

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These 5% senior convertible notes may be converted, at the holder’s option, into SuccessorCompany common stock, at any time, at a per share price of $46.86. This conversion price is subjectto adjustment for certain dilutive items and events. These notes are callable, at the Company’soption, in cash or Successor Company common stock, under certain conditions, beginning five yearsafter the issuance date. In the case of any such redemption, the Company may only redeem thesenotes with shares of common stock if the Successor Company’s common stock has traded at no lessthan 125% of the conversion price for the 60 consecutive trading days prior to the redemption date.The holders have the option to require the Company to repurchase their notes on the 5th and 10th

anniversary of the date of issuance, which the Company may elect to do through the payment ofcash or Successor Company common stock, or a combination of both.

• 6% senior notes were issued to the PBGC on the Effective Date. These notes are unsecured,mature 25 years from the issuance date and do not require any payment of principal beforematurity. Interest is payable semi-annually, in arrears. Interest may be paid with cash, in kind notesor Successor Company common stock through 2011 and thereafter in cash. These notes are callableat any time at 100% of par value, and can be redeemed with either cash or Successor Companycommon stock at the Company’s option. Upon a change in control or other event as defined in theagreement, the Company has an obligation to redeem the notes. In the case of such mandatoryredemption, the Company may elect to redeem the notes in cash, in shares of Successor Companycommon stock or a combination thereof.

Contingent Senior Unsecured Notes. In addition to the newly-issued debt as noted above, theCompany is obligated to issue to the PBGC 8% senior unsecured notes with an aggregate $500 millionprincipal amount in up to eight equal tranches of $62.5 million (with no more than two tranches issued ona single date) upon the occurrence of certain financial triggering events. Any required tranche will beissued no later than 45 days following the end of any fiscal year in which there is an issuance trigger event,starting with the fiscal year 2009 and ending with the fiscal year 2017. An issuance trigger event occurswhen, among other things, the Company’s EBITDAR exceeds $3.5 billion over the prior twelve monthsending September 30 or December 31 of any applicable fiscal year, beginning with the fiscal year 2009.However, if the issuance of a tranche would cause a default under any other securities then existing, theCompany may satisfy its obligations with respect to such tranche by issuing Successor Company commonstock having a market value equal to $62.5 million. Each issued tranche will mature 15 years from itsrespective issuance date, with interest payable in cash in semi-annual installments, and will be callable atany time at 100% of par value, plus accrued and unpaid interest.

At December 31, 2006, contractual principal payments under then-outstanding long-term debtagreements in each of the next five calendar years are as follows: 2007—$715 million; 2008—$684 million;2009—$759 million; 2010—$941 million and 2011—$836 million. After giving effect to the February 2007prepayment of $972 million and the amendment of the Credit Facility, the Company’s prepaid andcontractual principal payments in each of the next five calendar years are as follows: 2007—$1,687 million;2008—$674 million; 2009—$749 million; 2010—$931 million and 2011—$826 million.

In addition to the Credit Facility collateral that included a security interest in substantially all of theGuarantors tangible and intangible assets, various assets, principally aircraft, having an aggregate bookvalue of $4.4 billion at December 31, 2006, were pledged as security under various loan agreements. Theamendment to the Credit Facility released certain of the Company’s assets from collateral; however, thisamendment did not impact the $4.4 million of security pledged under separate loan agreements atDecember 31, 2006.

Predecessor Company Debt

As of December 31, 2005, long-term debt consisted of the DIP Financing and debt associated withcertain aircraft operated by Air Canada (“Air Canada Debt”). The amended agreement with the DIP

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financing lenders, which was approved by the Bankruptcy Court, consisted of a $1.1 billion term loan and a$200 million revolving credit and letter of credit facility and was due on March 31, 2006. The terms of theDIP Financing included covenants with respect to ongoing monthly financial requirements, includingthresholds for minimum EBITDAR, limitations on capital expenditures and minimum unrestricted cash.Failure to comply with these covenants would have constituted an event of default under the DIPFinancing and allowed the lenders to accelerate the loan. The Company complied with the EBITDARcovenant in the fourth quarter of 2005 and in the first quarter of 2006, up to the repayment of the DIPFacility with proceeds from the Credit Facility on the Effective Date. As of December 31, 2005, theCompany had outstanding debt of $154 million associated with aircraft leased by Air Canada. The AirCanada Debt has a fixed interest rate of 7.15% and is scheduled to mature at various times throughJanuary 2016.

During the Company’s reorganization under Chapter 11, it was not permitted to make payments onpre-petition debt while in Chapter 11; however, to the extent it had reached agreements with certainfinanciers on specific aircraft governed by Section 1110 of the Bankruptcy Code, the Company continuedto make payments on the secured notes financing the aircraft with the approval of the Bankruptcy Court.In addition, the Company had rejected certain aircraft that were originally financed under secured notesand had reclassified $651 million in principal amount of these secured notes to Liabilities subject tocompromise.

At December 31, 2005, the Company had recorded $434 million in municipal bonds to finance theacquisition and construction of certain facilities at Los Angeles, San Francisco, Miami and Chicago. Thesemunicipal bonds were rejected and/or settled as part of the bankruptcy process, and rejected amounts wererecorded in Liabilities subject to compromise at December 31, 2005. The Company does not have anyobligations for these municipal bonds as a result of its bankruptcy proceedings, except for potentialobligations related to leasehold security interests at LAX and SFO as discussed in Note 1, “VoluntaryReorganization Under Chapter 11—Significant Matters Remaining to be Resolved in Chapter 11 Cases.”

The Company has a subsidiary trust that had Trust Originated Preferred Securities (“TOPrS”)outstanding with a liquidation value of $97 million at December 31, 2005. These securities were issued inDecember 1996 and were previously reported on the Company’s Statements of Consolidated Financial

Position as Company-Obligated Mandatorily Redeemable Preferred Securities of a Subsidiary Trust. Thetrust was considered a variable interest entity under FASB Interpretation No. 46R, “Consolidation of

Variable Interest Entities—Revised” (“FIN 46R”) because the Company had limited ability to makedecisions about its activities. However, the Company was not considered the primary beneficiary of thetrust. Therefore, the trust and the Mandatorily Redeemable Preferred Securities issued by the trust werenot reported on the Company’s Statements of Consolidated Financial Position. Instead, the Companyreported its Junior Subordinated Debentures held by the trust as long-term debt included in Liabilitiessubject to compromise at December 31, 2005. Pursuant to the Plan of Reorganization, the TOPrS werecancelled on the Effective Date; no distribution was made to the holders of the TOPrS.

The Company’s pre-petition debt, which was classified as Liabilities subject to compromise, consistedof the following at December 31, 2005:

(In millions)Secured notes, 3.72% to 9.52%, averaging 6.67%, due through 2014 . . . . . $5,756Debentures, 9.00% to 11.21%, averaging 9.89%, due through 2021 . . . . . . 646Municipal bonds, 5.63% to 6.38%, averaging 5.90%, due through 2035 . . . 434Preferred securities of trust, 13.25%, due 2026 . . . . . . . . . . . . . . . . . . . . . . . . 97

$6,933

Various assets, principally aircraft, having an aggregate book value of $9 billion at December 31, 2005,were pledged as security under various loan agreements.

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(12) ESOP Preferred Stock

On June 26, 2003, the ESOP was terminated following the publication of a regulation by the InternalRevenue Service that would permit the distribution of the remaining ESOP shares to plan participantswithout jeopardizing the Company’s ability to utilize its net operating losses. As a result of the terminationof the ESOP, employees were given until August 18, 2003 to make elections for distribution of their stockin the plan. For participants who did not make an election regarding their stock before the August 18deadline, the stock remained in the plan and distributions continued on a monthly basis until June of 2004,when the Company implemented a forced distribution of the remaining shares in the plan. On June 28,2004, all remaining ESOP shares consisting of 1,181,201 Class 1 ESOP Preferred Stock, 279,706 Class 2ESOP Preferred Stock and 1,412,361 Voting ESOP Preferred Stock were converted to common and eitherdistributed to participants at their request or transferred to a broker account in their name.

Each share of Class 1 and Class 2 ESOP Preferred Stock was convertible into four shares of UALcommon stock. Shares typically were converted to common as employees retired or otherwise left theCompany. The ESOP Preferred Stock was nonvoting, with a par value of $0.01 per share and a liquidationvalue of $126.96 per share. The Class 1 ESOP Preferred Stock provided a fixed annual dividend of$8.8872 per share, which ceased on March 31, 2000; the Class 2 ESOP Preferred Stock did not pay a fixeddividend. The Voting ESOP Preferred Stock had a par value and liquidation preference of $0.01 per share.The stock was not entitled to receive any dividends and was convertible into .0004 shares of UAL commonstock.

(13) Preferred Stock

Pursuant to the Plan of Reorganization, preferred stock issued before the Petition Date was canceledon the Effective Date, and no distribution was made to holders of those securities.

Successor Company Preferred Stock

The Successor Company is authorized to issue 250 million shares of preferred stock (without parvalue), 5 million shares of 2% convertible preferred stock (par value $0.01 per share) and two shares ofjunior preferred stock (par value $0.01 per share).

The 2% convertible preferred stock was issued to the PBGC on the Effective Date. The shares wereissued at a liquidation value of $100 per share, convertible at any time following the second anniversary ofthe issuance date into common stock of the Successor Company at a conversion price of $46.86 percommon share; with dividends payable in kind semi-annually (in the form of increases to the liquidationvalue of the issued and outstanding shares); the preferred stock ranks pari passu with all current and futureUAL or United preferred stock and is redeemable at any time at the then-current liquidation value (plusaccrued and unpaid dividends) at the option of the issuer. The preferred stock is mandatorily convertible15 years from the date of issuance. Upon a fundamental change or a change in ownership as defined in theCompany’s restated certificate of incorporation, holders of shares of the preferred stock are also entitledto receive payment equal to the amount they would receive in an actual liquidation of the Company. AtDecember 31, 2006, 5 million shares of 2% convertible preferred stock were outstanding with an aggregateliquidation value of $509 million, which includes $9 million in dividends that were declared in 2006. AtDecember 31, 2006, the carrying value of the 2% convertible preferred stock was $361 million whichincludes $9 million in dividends that were declared in 2006. In addition, the two shares of junior preferredstock have been issued.

Predecessor Company Preferred Stock

At December 31, 2005, the Predecessor Company had outstanding 3,203,177 depositary shares, eachrepresenting 1/1000 of one share of Series B 12 1⁄4% preferred stock, with a liquidation preference of

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$25 per depositary share ($25,000 per Series B preferred share) and a stated capital of $0.01 per Series Bpreferred share. The Predecessor Company had the option to redeem any portion of the Series Bpreferred stock or the depositary shares for cash after July 11, 2004, at the equivalent of $25 per depositaryshare, plus accrued dividends. The Series B preferred stock was not convertible into any other securities,had no stated maturity and was not subject to mandatory redemption. In accordance with the Company’sconfirmed Plan of Reorganization, the Series B preferred stock was canceled.

Before its cancellation, the Series B preferred stock ranked senior to all other preferred and commonstock outstanding, except the TOPrS, as to receipt of dividends and amounts distributed upon liquidation.The Series B preferred stock had voting rights only to the extent required by law and with respect tocharter amendments that adversely affected the preferred stock or the creation or issuance of any securityranking senior to the preferred stock. Additionally, if dividends were not paid for six cumulative quarters,the Series B preferred stockholders were entitled to elect two additional members to the UAL Board ofDirectors until all dividends were paid in full. In accordance with the Company’s restated certificate ofincorporation, it was authorized to issue a total of 50,000 shares of Series B preferred stock.

On September 30, 2002, the Company announced the suspension of the payment of dividends on theSeries B preferred stock and upon its Chapter 11 filing, stopped accruing for unpaid dividends on theSeries B preferred stock. The amount of dividends in arrears was approximately $32 million as ofDecember 31, 2005.

At December 31, 2005, UAL was authorized to issue up to 15,986,584 additional shares of serialpreferred stock.

(14) Financial Instruments and Risk Management

Instruments designated as cash flow hedges receive favorable accounting treatment under SFAS 133,as long as the hedge is effective and the underlying transaction is probable. If both factors are present, theeffective portion of the changes in fair value of these contracts is recorded in accumulated othercomprehensive income (loss) until earnings are affected by the cash flows being hedged.

Instruments classified as economic hedges do not qualify for hedge accounting under SFAS 133.Under this classification all changes in the fair value of these contracts are recorded currently in operatingincome, with the offset to either current assets or liabilities each reporting period.

Aircraft Fuel Hedges.

During 2004, the Company began to implement a strategy to hedge a portion of its price risk relatedto projected jet fuel requirements primarily through collar options. The collars (only some of which weredesignated as cash flow hedges) involve the purchase of fuel call options with the simultaneous sale of fuelput options with identical expiration dates. Contracts designated as cash flow hedges are recorded at fairvalue, with the changes in intrinsic value, to the extent they are effective, recorded in other comprehensiveloss until the underlying hedged fuel is consumed. To the extent that the designated cash flow hedges areineffective, gain or loss is recognized currently. As part of fresh-start reporting for economic hedges, theCompany changed its classification to record the gains and losses currently in Aircraft fuel in theStatements of Consolidated Operations as these hedges are executed to mitigate its exposure to fuel pricevolatility. Previously such amounts were recorded as an element of non-operating income.

At December 31, 2005 and for the one month ended January 31, 2006, the Predecessor Company hadno fuel hedges in place. In the eleven months ended December 31, 2006, the Successor Company enteredinto and settled aircraft fuel hedges for its mainline operations that were classified as economic hedges.

In 2005, the Predecessor Company recognized income of $40 million (which included a loss ofapproximately $1 million as a result of ineffective fuel hedges) in non-operating income mainly due to

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non-designated hedges. In the eleven months ended December 31, 2006, the Successor Companyrecognized a net loss of $26 million which included a $24 million realized loss on settled contracts and$2 million of unrealized mark-to-market losses for contracts settling after December 31, 2006, all of whichwere classified as mainline fuel expense in the Statements of Consolidated Operations.

As of December 31, 2006, the Company had hedged 32% of forecasted first quarter 2007 fuelconsumption through crude oil collars and swaps. On a weighted-average basis, hedge protection begins ifcrude exceeds $65 per barrel and is capped at $74 per barrel. Conversely, payment obligations begin ifcrude, on a weighted-average basis, drops below $59 per barrel.

As of December 31, 2006, the Company had hedged 4% of forecasted fuel consumption for thesecond quarter 2007 predominantly through crude oil three-way collars with upside protection, on aweighted-average basis, beginning from $64 per barrel and capped at $75 per barrel. Payment obligations,on a weighted-average basis, begin if crude drops below $60 per barrel.

Interest Rate Swap.

The Company uses interest rate swap agreements to effectively limit exposure to interest ratemovements within the parameters of the Company’s interest rate hedging policy. In February 2006, theSuccessor Company entered into an interest rate swap with an initial notional amount of $2.45 billion thatwould have decreased to $1.8 billion over the term of the swap. The swap would have expired inFebruary 2012 and required that the Company pay a fixed rate of 5.14% and receive a floating rate basedon the three-month LIBOR rate.

At December 31, 2006, the Company determined that it is no longer probable that a portion of theforecasted cash flows hedged by the swap would occur, in light of the Company’s developing plans to retirea portion of the Credit Facility in advance of scheduled maturities. For the eleven months endedDecember 31, 2006, the total unrealized pre-tax loss on the swap was $12 million, of which a $4 million losswas recorded in earnings as interest expense and $8 million was recorded as other comprehensive loss. InJanuary 2007, as a result of the Company’s reevaluation of the mix of fixed-rate and floating-rate debt in itsdebt portfolio, the Company terminated the swap for a payment of $4 million. In 2007, the $8 million gainin swap value from December 31, 2006 to the termination date will be recognized in earnings.

Fair Value of Financial Instruments.

The following methods and assumptions were used to estimate the fair value of each class of financialinstruments for which such estimates can be made:

Cash and Cash Equivalents, Restricted Cash and Short-term Investments.

The carrying amounts approximate fair value because of the short-term maturity of these investments.

Derivative Financial Instruments.

Market prices used to determine fair value are primarily based on closing exchange prices.

Preferred Stock and Long-Term Debt.

The fair value is based on the quoted market prices for the same or similar issues, discounted cashflow models using appropriate market rates and the Black-Scholes model to value stock options.

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The following table presents the carrying amounts and estimated fair values of the Company’sfinancial instruments at December 31, 2006 and 2005:

2006 2005

(In millions)CarryingAmount

FairValue

CarryingAmount

FairValue

Long-tem debt (including current portion). . $9,140 $9,510 $ 154 $ 149Preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . 361 443 — —DIP financing . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 1,157 1,157Fuel derivative contracts—losses . . . . . . . . . . 2 2 — —Interest rate swap loss. . . . . . . . . . . . . . . . . . . . 12 12 — —

(15) Commitments, Contingent Liabilities and Uncertainties

General Guarantees and Indemnifications. In the normal course of business, the Company enters intonumerous real estate leasing and aircraft financing arrangements that have various guarantees included inthe contracts. These guarantees are primarily in the form of indemnities. In both leasing and financingtransactions, the Company typically indemnifies the lessors, and any tax/financing parties, against tortliabilities that arise out of the use, occupancy, operation or maintenance of the leased premises or financedaircraft. Currently, the Company believes that any future payments required under these guarantees orindemnities would be immaterial, as most tort liabilities and related indemnities are covered by insurance(subject to deductibles). Additionally, certain leased premises such as fueling stations or storage facilitiesinclude indemnities of such parties for any environmental liability that may arise out of or relate to the useof the leased premises.

Legal and Environmental Contingencies. UAL has certain contingencies resulting from litigation andclaims (including environmental issues) incident to the ordinary course of business. Management believes,after considering a number of factors, including (but not limited to) the views of legal counsel, the natureof contingencies to which the Company is subject and prior experience, that the ultimate disposition ofthese contingencies will not materially affect the Company’s consolidated financial position or results ofoperations.

The Company records liabilities for legal and environmental claims when a loss is probable andreasonably estimatable. These amounts are recorded based on the Company’s assessments of thelikelihood of their eventual disposition. The amounts of these liabilities could increase or decrease in thenear term, based on revisions to estimates relating to the various claims.

The Company anticipates that if ultimately found liable, its damages from claims arising from theevents of September 11, 2001 could be significant; however, the Company believes that, under the AirTransportation Safety and System Stabilization Act of 2001, its liability will be limited to its insurancecoverage.

Commitments. At December 31, 2006, future commitments for the purchase of property andequipment, principally aircraft, approximated $2.5 billion, after deducting advance payments. TheCompany’s current commitments are primarily for the purchase of, in the aggregate, 42 A319 and A320aircraft. In January 2006, United reached an agreement with the airframe manufacturer to delay, with theright to cancel these future orders. Such action could cause the forfeiture of $91 million of advancepayments if United does not take future delivery of these aircraft. The Company also reached anagreement with the engine manufacturer eliminating all provisions pertaining to firm commitments andsupport for future Airbus aircraft. While this permits future negotiations on engine pricing with any enginemanufacturer, restructured aircraft manufacturer commitments have assumed that aircraft will bedelivered with installed engines at list price. The Company’s current commitments would require thepayment of an estimated $0.1 billion in 2007, $0.1 billion for the combined years of 2008 and 2009,$0.7 billion for the combined years of 2010 and 2011 and $1.6 billion thereafter.

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Guarantees and Off-Balance Sheet Financing.

Fuel Consortia. The Company participates in numerous fuel consortia with other carriers at majorairports to reduce the costs of fuel distribution and storage. Interline agreements govern the rights andresponsibilities of the consortia members and provide for the allocation of the overall costs to operate theconsortia based on usage. The consortium (and in limited cases, the participating carriers) have enteredinto long-term agreements to lease certain airport fuel storage and distribution facilities that are typicallyfinanced through tax-exempt bonds (either special facilities lease revenue bonds or general airport revenuebonds), issued by various local municipalities. In general, each consortium lease agreement requires theconsortium to make lease payments in amounts sufficient to pay the maturing principal and interestpayments on the bonds. As of December 31, 2006, approximately $484 million principal amount of suchbonds were secured by fuel facility leases at major hubs in which United participates, as to which Unitedand each of the signatory airlines has provided indirect guarantees of the debt. United’s exposure isapproximately $171 million principal amount of such bonds based on its recent consortia participation. TheCompany’s exposure could increase if the participation of other carriers decreases. The guarantees willexpire when the tax-exempt bonds are paid in full, which ranges from 2010 to 2028. The Company did notrecord a liability at the time these indirect guarantees were made.

Municipal Bond Guarantees. The Company has entered into long-term agreements to lease certainairport and maintenance facilities that are financed through tax-exempt municipal bonds. These bondswere issued by various local municipalities to build or improve airport and maintenance facilities. Underthese lease agreements, United is required to make rental payments in amounts sufficient to pay thematuring principal and interest payments on the bonds. However, as a result of the bankruptcy filing,United was not permitted to make payments on unsecured pre-petition debt. The Company was advisedthat these municipal bonds may be unsecured (or in certain instances, partially secured). In 2006, as aresult of the final Bankruptcy Court decisions, certain leases (SFO, JFK and LAX) were considered to befinancings resulting in the Company’s guarantees being discharged in bankruptcy. The DEN lease was notrejected; therefore, the Company still has a guarantee under this lease. The Company has guaranteedinterest and principal payments on $261 million of the DEN bonds, which were issued in 1992 and are duein 2032 unless the Company elects not to extend its lease in which case the bonds are due in 2023. Theoutstanding bonds and related guarantee are not recorded in the Company’s Statements of Consolidated

Financial Position at December 31, 2006, based on proper application of GAAP. The related leaseagreement is accounted for as an operating lease, and the related rent expense is recorded on a straight-line basis. The annual lease payments through 2023 and the final payment for the principal amount of thebonds are included in the future operating lease payments disclosed in the Non-aircraft lease payments inNote 16 “Lease Obligations.” There remains an issue as to whether the LAX and SFO bondholders have asecured interest in certain of the Company’s leasehold improvements. The Company has accrued anamount which it estimates is probable to be approved by the Bankruptcy Court for these secured interests.See Note 1, “Voluntary Reorganization Under Chapter 11—Significant Matters Remaining to be Resolvedin Chapter 11 Cases,” for a discussion of ongoing litigation with respect to certain of these obligations.

Collective Bargaining Agreements.

Approximately 81% of United’s employees are represented by various U.S. labor organizations.During 2005, United reached new agreements with its labor unions for new collective bargainingagreements which became effective in January 2005. These agreements are not amendable untilJanuary 2010. In addition, an initial collective bargaining agreement with the International Federation ofProfessional and Technical Engineers was ratified on March 8, 2006, with an initial effective date ofMarch 1, 2006; this agreement is likewise not amendable until January 2010.

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(16) Lease Obligations

UAL leases aircraft, airport passenger terminal space, aircraft hangars and related maintenancefacilities, cargo terminals, other airport facilities, other commercial real estate, office and computerequipment and vehicles. As allowed under Section 365 of the Bankruptcy Code, during its reorganizationthe Company assumed, assumed and assigned, or rejected certain executory contracts and unexpiredleases, including leases of real property, aircraft and aircraft engines, subject to the approval of theBankruptcy Court and certain other conditions. During bankruptcy, the Company also entered intonumerous aircraft financing term sheets with financiers, some of which were implemented before theEffective Date, and others of which were implemented on the Effective Date. Under fresh-start reporting,the Company was required to apply lease modification testing on these leases, which resulted in thereclassification of some financings as capital leases or operating leases for the Successor Company, whichwere different from classifications for the Predecessor Company.

In connection with fresh-start reporting requirements, aircraft operating leases were adjusted to fairvalue and a net deferred asset of $263 million was recorded in the Statement of Consolidated FinancialPosition on the Effective Date, representing the net present value of the differences between stated leaserates in agreed term sheets and the fair market lease rates for similar aircraft. These deferred amounts areamortized on a straight-line basis as an adjustment to aircraft rent expense over the individual applicableremaining lease terms, generally from one to 18 years.

At December 31, 2006, scheduled future minimum lease payments under capital leases (substantiallyall of which are for aircraft) and operating leases having initial or remaining noncancelable lease terms ofmore than one year were as follows:

Operating Lease Payments CapitalMainline United Express Lease

(In millions) Aircraft Aircraft Non-aircraft Payments(a)Payable during—

2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 358 $ 413 $ 507 $ 2552008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351 409 484 3212009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 409 467 1782010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307 380 453 4412011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303 358 406 170After 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,239 1,117 3,464 698

Total minimum lease payments . . . . . . . . . . . . . . . . . . $2,875 $3,086 $5,781 2,063

Imputed interest (at rates of 1.1% to 10.0%) . . . . . . (603)Present value of minimum lease payments . . . . . . . . 1,460Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (110)Long-term obligations under capital leases . . . . . . . . $1,350

(a) Includes non-aircraft capital lease payments aggregating $22 million in years 2007 through 2011, andUnited Express capital lease obligations of $15 million in both 2007 and 2008, $14 million in 2009,$13 million in 2010, $12 million in 2011 and $19 million thereafter.

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At December 31, 2006, UAL leased 214 mainline aircraft, 47 of which were accounted for as capitalleases. These leases have initial terms of 5 to 26 years, with expiration dates ranging from 2007 through2024. Under the terms of most leases, the Company has the right to purchase the aircraft at the end of thelease term, in some cases at fair market value and in others, which include 167 operating leases, at fairmarket value or a percentage of cost. Additionally, the amounts in the above table include lease paymentsrelated to the Company’s United Express contracts for 28 aircraft under capital leases and 262 aircraftunder operating leases as described in Note 2(i), “Summary of Significant Accounting Policies—UnitedExpress.”

Certain of the Company’s aircraft lease transactions contain provisions such as put options giving thelessor the right to require us to purchase the aircraft at lease termination for a certain amount resulting inresidual value guarantees. Leases containing this or similar provisions are recorded as capital leases on thebalance sheet and, accordingly, all residual value guarantee amounts contained in the Company’s aircraftleases are fully reflected as capital lease obligations in the Statements of Consolidated Financial Position.

In connection with certain euro-denominated aircraft financings accounted for as capital leases,United had on deposit in certain banks at December 31, 2006 an aggregate 396 million euros($522 million) and $17 million in U.S. denominated deposits, and had pledged an irrevocable securityinterest in such deposits to certain of the aircraft lessors. These deposits will be used to repay an equivalentamount of recorded capital lease obligations, and are classified as aircraft lease deposits in the Statementsof Consolidated Financial Position.

Amounts charged to rent expense, net of minor amounts of sublease rentals, were $833 million for theSuccessor Company for the eleven months ended December 31, 2006; and $76 million, $1.0 billion and$1.1 billion for the month ended January 31, 2006 and the years ended December 31, 2005 and 2004,respectively, for the Predecessor Company. Included in Regional affiliates expense in the Statements ofConsolidated Operations were operating rents for United Express aircraft of $403 million for the SuccessorCompany for the eleven months ended December 31, 2006; as well as $35 million and $449 million for themonth ended January 31, 2006 and the year ended December 31, 2005, respectively, for the PredecessorCompany.

In the first quarter of 2004, the Company adopted FASB Interpretation No. 46, “Consolidation ofVariable Interest Entities” (“FIN 46”) and FIN 46R, as subsequently amended, which requires disclosure ofcertain information about VIEs that are consolidated and certain other information about VIEs that arenot consolidated.

The Company has various financing arrangements for 79 aircraft in which the lessors are trustsestablished specifically to purchase, finance and lease aircraft to United. These leasing entities meet thecriteria for VIEs; however, the Company does not hold a significant variable interest in, and is notconsidered the primary beneficiary of the leasing entities since the lease terms are consistent with marketterms at the inception of the lease and do not include a residual value guarantee, fixed-price purchaseoption or similar feature that obligates us to absorb decreases in value, or entitles the Company toparticipate in increases in the value, of the financed aircraft.

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(17) Statement of Consolidated Cash Flows—Supplemental Disclosures

Supplemental disclosures of cash flow information and non-cash investing and financing activitieswere as follows:

Successor PredecessorPeriod from

February 1 toDecember 31,

Period fromJanuary 1

to January 31,Year Ended

December 31,(In millions) 2006 2006 2005 2004Cash paid during the period for:

Interest (net of amounts capitalized) . . . . . . . . . . . . . . . $703 $35 $ 456 $ 397Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — —

Non-cash transactions:Long-term debt incurred to acquire assets . . . . . . . . . . $242 $— $ — $ 172Capital lease obligations incurred to acquire assets. . . 155 — — —Adoption of SFAS 158, net $47 of tax, recorded in

other comprehensive income . . . . . . . . . . . . . . . . . . . . 87 — — —Increase in pension intangible assets . . . . . . . . . . . . . . . — (4) (661) (239)Net unrealized gain (loss) on derivatives recorded in

other comprehensive income (loss) . . . . . . . . . . . . . . (5) 24 — —

In addition to the above non-cash transactions, see Note 1, “Voluntary Reorganization UnderChapter 11,” Note 11, “Debt Obligations” and Note 13, “Preferred Stock.”

(18) Advanced Purchase of Miles

In October 2005, the Company entered into an amendment to its agreement with Chase regarding theMileage Plus Visa card under which Chase pays in advance for frequent flyer miles to be earned byMileage Plus members for making purchases using the Mileage Plus Visa card. The existing agreementincludes an annual guaranteed payment for the purchase of frequent flyer miles.

In addition to extending the agreement until 2012 and making certain other adjustments in therelationship, the agreement provided for an advance purchase of miles of $200 million in 2005. Thisadvanced purchase of miles otherwise reduced the annual guaranteed payments for 2006 through 2009 by$75 million per year. In addition, the Company provided a junior lien upon, and security interest in, allcollateral pledged or in which security interest is granted, as security in connection with the Credit Facility.The security interest was junior to other Credit Facility debt, and applied to no more than $850 million intotal advance purchases at any time.

In February 2007, the Company amended the agreement with Chase whereby Chase released theirjunior security interest in the collateral pledged to the Amended Credit Facility. However under certaincircumstances, the Company is obligated to reinstate Chase’s junior security interest in the assets pledgedto the Amended Credit Facility. As of December 31, 2006 and 2005, the total advanced purchase of mileswas $681 million and $679 million, respectively.

(19) Special Items

2006—Successor Company

SFO Municipal Bonds Security Interest. In October 2006, the Bankruptcy Court issued an orderdeclaring that the owners of certain municipal bonds, issued before the Petition Date to financeconstruction of certain leasehold improvements at SFO, should be allowed a secured claim ofapproximately $27 million, based upon the court-determined fair value of UAL’s underlying leasehold.

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After the denial of post-trial motions, both parties have appealed to the District Court. In accordance withSOP 90-7, as of the Effective Date, UAL had recorded $60 million as its best estimate of the probablesecurity interest to be awarded in this unresolved litigation. In the third quarter of 2006 the Companyrecorded a special item of $30 million benefit to operating income, to reduce the Company’s recordedobligation for the SFO municipal bonds to the amount the Company now estimates is probable to beallowed by the Bankruptcy Court, in accordance with Practice Bulletin 11.

ALPA Non-Qualified Pension Plan. In the fourth quarter of 2006, the Company recorded a specialitem of $24 million as a benefit to operating income to reduce the Company’s recorded obligation for thismatter. This adjustment was based on the receipt of a favorable court ruling in ongoing litigation and theCompany’s determination that it is now probable the Company will not be required to satisfy thisobligation.

LAX Municipal Bonds Obligation. In the fourth quarter of 2006, based on litigation developments,the Company recorded a special item of $18 million as a charge to operating income to adjust theCompany’s recorded obligation for the LAX municipal bonds to the amount the Company now estimatesis probable to be allowed by the Bankruptcy Court.

See Note 1, “Voluntary Reorganization Under Chapter 11—Significant Matters Remaining to beResolved in Chapter 11 Cases” for further information on these items.

2005—Predecessor Company

Aircraft Impairment. During the second quarter of 2005, the Company recognized a charge of$18 million for aircraft impairments related to the planned accelerated retirement of certain aircraft.

2004—Predecessor Company

Air Canada. During the third quarter of 2004, Air Canada successfully emerged from bankruptcyprotection under the Companies’ Creditors Arrangement Act of the Canada Business Corporation Act.The Company had filed a pre-petition claim against Air Canada based on its equity interest in three AirbusA330 aircraft leased to Air Canada. As part of its plan of reorganization, Air Canada offered its unsecuredcreditors the opportunity to participate in their initial public offering. The Company subscribed to 986,986shares in the reorganized company in August 2004 and sold them in October 2004 for a nominal gain.Separately, the Company sold its interest in its pre-petition claim to a third-party and recorded a non-operating gain of $18 million during the third quarter of 2004.

Aircraft Write-down. During the first quarter of 2004, the Company incurred a $13 million charge innon-operating expense for the write-down of certain non-operating B767 aircraft.

(20) Severance Accrual

The Company has implemented several cost saving initiatives that have resulted in a reduction inworkforce such as the outsourcing of administrative functions, the closing of certain call centers and itsannouncement of the elimination of certain salaried and management positions through attrition andlayoffs. The Company’s severance policy provides the affected employees salary continuation as well ascertain insurance benefits for a specified period of time. Accordingly, the Company has estimated itsseverance obligations to be $5 million as of December 31, 2006 in accordance with Statement of FinancialAccounting Standards No. 112 (As Amended), “Employers’ Accounting for Postemployment Benefits—anamendment of FASB Statements No. 5 and 43.”

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The following is a reconciliation of activity related to the severance accrual for the year endedDecember 31, 2006:

(In millions)Balance at December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7

Accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Accrual adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5)Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27)

Balance at December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5

(21) Selected Quarterly Financial Data (Unaudited)Predecessor Successor

(In millions, exceptPeriod fromJanuary 1 to

Period fromFebruary 1 to Quarter Ended

per share amounts) January 31 March 31 March 31 June 30 September 30 December 312006:Operating revenues . . . . . . . . . $ 1,458 $3,007 (a) $ 5,113 $ 5,176 $ 4,586Earnings (loss) from

operations . . . . . . . . . . . . . . . (52) (119) (a) 260 335 23Net income (loss) . . . . . . . . . . . 22,851 (223) (a) 119 190 (61)Basic earnings (loss) per share $196.61 $ (1.95) (a) $ 1.01 $ 1.62 $ (0.55)Diluted earnings (loss) per

share . . . . . . . . . . . . . . . . . . . . $196.61 $ (1.95) (a) $ 0.93 $ 1.30 $ (0.55)

PredecessorPeriod fromJanuary 1 to

Period fromFebruary 1 to Quarter Ended

January 31 March 31 March 31 June 30 September 30 December 312005:Operating revenues . . . . . . . . . (a) (a) $ 3,915 $ 4,423 $ 4,655 $ 4,386Earnings (loss) from

operations . . . . . . . . . . . . . . . (a) (a) (250) 48 165 (182)Net loss. . . . . . . . . . . . . . . . . . . . (a) (a) (1,070) (1,430) (1,772) (16,904)Basic and diluted loss per

share . . . . . . . . . . . . . . . . . . . . (a) (a) $ (9.23) $(12.33) $(15.26) $(145.47)

(a) Not applicable

The quarterly results were impacted by the following significant items:

• In 2006, the January period includes reorganization income of $22.9 billion.

• The third quarter of 2006 includes income of $30 million from a special item as discussed inNote 19, “Special Items.”

• The third quarter of 2006 was favorably impacted by the reversal of accrued interest of $30 millionwhile the quarters ended March 31, 2006 and June 30, 2006 were adversely affected by interestaccruals related to the Chase agreement. In 2005, the net loss for the quarters ended March 31,June 30, September 30, and December 31 included reorganization items of $768 million, $1.4billion, $1.8 billion, and $16.6 billion, respectively. In addition, the second quarter of 2005 includedan impairment charge of $18 million for the write down of aircraft.

• Diluted EPS in the third quarter of 2006 was significantly impacted by the Limited-SubordinationNotes. The change in the dilutive impact of these notes was primarily due to the modification of theconversion price from $46.86 to $34.84 in July 2006. See Note 11, “Debt Obligations,” for furtherinformation on this debt modification.

See Note 19, “Special Items,” for further discussion of these items.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

The Company maintains controls and procedures that are designed to ensure that informationrequired to be disclosed in the reports filed or submitted by the Company to the Securities and ExchangeCommission (“SEC”) is recorded, processed, summarized, and reported, within the time periods specifiedby the SEC’s rules and forms, and is accumulated and communicated to management including the ChiefExecutive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding requireddisclosure. The Company’s management, including the Chief Executive Officer and Chief FinancialOfficer, performed an evaluation to conclude with reasonable assurance that the Company’s disclosurecontrols and procedures were designed and operating effectively to report the information it is required todisclose in the reports it files with the SEC on a timely basis. Based on that evaluation, our Chief ExecutiveOfficer and our Chief Financial Officer have concluded that as of December 31, 2006, our disclosurecontrols and procedures were not effective due to a material weakness related to the operation of ourinternal control over financial reporting with respect to the accounting and disclosure for income taxes, asdiscussed below in Management’s Report on Internal Control over Financial Reporting. Additionalreview, evaluation and oversight have been undertaken to ensure our consolidated financial statementswere prepared in accordance with generally accepted accounting principles and, as a result, we haveconcluded that the consolidated financial statements in this Form 10-K fairly present, in all materialrespects, our financial position, results of operations and cash flows for the periods presented.

The only changes to the Company’s internal control over financial reporting that occurred during thequarter ended December 31, 2006 that have materially affected or are reasonably likely to materially affectthe Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f) under the Securities Exchange Act of 1934) are new controls implemented for the preparation ofan effective tax provision that is no longer zero, and for the implementation of new tax accountingstandard FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation ofFASB Statement No. 109” in 2007.

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Management Report on Internal Control Over Financial Reporting

March 16, 2007

To the Stockholders ofUAL CorporationElk Grove Township, Illinois

The management of UAL Corporation and subsidiaries (the “Company”) is responsible forestablishing and maintaining adequate internal control over financial reporting, as such term is defined inExchange Act Rules 13a-15(f). Our internal control over financial reporting is designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles. Because ofits inherent limitations, internal control over financial reporting may not prevent or detect misstatements.Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controlsmay become inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

Under the supervision and with the participation of management, including our Chief ExecutiveOfficer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal controlover financial reporting based on the framework in Internal Control—Integrated Framework issued by theCommittee of the Sponsoring Organizations of the Treadway Commission.

Based on that evaluation, management identified a deficiency in the operation of the Company’sinternal control over financial reporting related to the accounting and disclosure for income taxes, whichconstituted a material weakness in our internal control over financial reporting. As defined in PublicCompany Accounting Oversight Board Auditing Standard No. 2, a material weakness is a significantdeficiency, or a combination of significant deficiencies, that results in more than a remote likelihood that amaterial misstatement of a company’s annual or interim financial statements would not be prevented ordetected. While the Company had the appropriate control procedures in place, high staff turnover causedthe Company to poorly execute the controls for evaluating and recording its current and deferred incometax provision and related deferred taxes balances. This control deficiency did not result in a materialmisstatement, but did result in adjustments to the deferred tax assets and liabilities, net operating losses,valuation allowance and footnote disclosures and could have resulted in a misstatement of current anddeferred income taxes and related disclosures that would result in a material misstatement of annual orinterim financial statements.

Based upon management’s determination of the existence of a material weakness in accounting anddisclosure for taxes, management has concluded that internal control over financial reporting was noteffective as of December 31, 2006.

Management’s assessment of the ineffectiveness of internal control over financial reporting as ofDecember 31, 2006 has been audited by Deloitte & Touche LLP, an independent registered publicaccounting firm, as stated in their report which is included herein.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders ofUAL CorporationElk Grove Township, Illinois

We have audited management’s assessment, included in the accompanying Management Report onInternal Control Over Financial Reporting, that UAL Corporation and subsidiaries (the “Company”) didnot maintain effective internal control over financial reporting as of December 31, 2006, because of theeffect of the material weakness identified in management’s assessment based on criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission. The Company’s management is responsible for maintaining effective internalcontrol over financial reporting and for its assessment of the effectiveness of internal control over financialreporting. Our responsibility is to express an opinion on management’s assessment and an opinion on theeffectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we plan and perform the audit to obtainreasonable assurance about whether effective internal control over financial reporting was maintained inall material respects. Our audit included obtaining an understanding of internal control over financialreporting, evaluating management’s assessment, testing and evaluating the design and operatingeffectiveness of internal control, and performing such other procedures as we considered necessary in thecircumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under thesupervision of, the company’s principal executive and principal financial officers, or persons performingsimilar functions, and effected by the company’s board of directors, management, and other personnel toprovide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles. Acompany’s internal control over financial reporting includes those policies and procedures that (1) pertainto the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance that transactions are recordedas necessary to permit preparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including thepossibility of collusion or improper management override of controls, material misstatements due to erroror fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of theeffectiveness of the internal control over financial reporting to future periods are subject to the risk thatthe controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.

A material weakness is a significant deficiency, or a combination of significant deficiencies, that resultsin more than a remote likelihood that a material misstatement of the annual or interim financialstatements will not be prevented or detected. The following material weakness has been identified andincluded in management’s assessment: the Company lacked effective operating controls for evaluating andrecording its current and deferred income tax provision and related deferred tax balances. This controldeficiency resulted in adjustments to the deferred tax assets and liabilities, net operating losses, valuationallowance and footnote disclosures and could result in a misstatement of current and deferred incometaxes and related disclosures that would result in a material misstatement of annual or interim financial

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statements. This material weakness was considered in determining the nature, timing and extent of audittests applied in our audit of the consolidated financial statements and financial statement schedule as ofDecember 31, 2006 and for the eleven month period ended December 31, 2006 and for the one monthended January 31, 2006 and this report does not affect our report on such financial statements andfinancial statement schedule.

In our opinion, management’s assessment that the Company did not maintain effective internalcontrol over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based onthe criteria established in Internal Control—Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission. Also in our opinion, because of the effect of thematerial weakness described above on the achievement of the objectives of the control criteria, theCompany has not maintained, in all material respects, effective internal control over financial reporting asof December 31, 2006, based on the criteria established in Internal Control—Integrated Framework issuedby the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting OversightBoard (United States), the statement of consolidated financial position of the Company as ofDecember 31, 2006 and the results of their operations and their cash flows for the eleven month periodended December 31, 2006 and for the one month period ended January 31, 2006 and our report datedMarch 16, 2007 expressed an unqualified opinion on those financial statements and financial statementschedule and included explanatory paragraphs regarding the Company’s emergence from bankruptcy, thechanges in accounting for share-based payments, and the method of accounting for and the disclosuresregarding pension and postretirement benefits.

/s/ Deloitte & Touche LLPChicago, IllinoisMarch 16, 2007

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ITEM 9B. OTHER INFORMATION.

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Certain information required by this item is incorporated by reference from the Company’s definitiveproxy statement for its 2007 Annual Meeting of Stockholders. Information regarding the executive officersis included in Part I of this Form 10-K under the caption “Executive Officers of the Registrant.”

ITEM 11. EXECUTIVE COMPENSATION.

Information required by this item is incorporated by reference from the Company’s definitive proxystatement for its 2007 Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED STOCKHOLDER MATTERS.

Information required by this item is incorporated by reference from the Company’s definitive proxystatement for its 2007 Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR

INDEPENDENCE.

Information required by this item is incorporated by reference from the Company’s definitive proxystatement for its 2007 Annual Meeting of Stockholders.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Information required by this item is incorporated by reference from the Company’s definitive proxystatement for its 2007 Annual Meeting of Stockholders.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES.

(a)(1) Financial Statements. The financial statements required by this item are listed in Item 8,“Financial Statements and Supplementary Data” herein.

(2) Financial Statement Schedules. The financial statement schedule required by this item is listedbelow and included in this report after the signature page hereto.

Schedule II—Valuation and Qualifying Accounts for the month ended January 31, 2006, theeleven month period ended December 31, 2006 and the years ended December 31, 2005 and2004.

All other schedules are omitted because they are not applicable, not required or the requiredinformation is shown in the consolidated financial statements or notes thereto.

(b) Exhibits. The exhibits required by this item are listed in the Exhibit Index which immediatelyprecedes the exhibits filed with this Form 10-K, and is incorporated herein by this reference.Each management contract or compensatory plan or arrangement is denoted with a “†” in theExhibit Index.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, theCompany has duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto dulyauthorized, on the 16th day of March, 2007.

UAL CORPORATION

/s/ GLENN F. TILTON

Glenn F. TiltonChairman of the Board, Presidentand Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signedbelow on the 16th day of March, 2007 by the following persons on behalf of the registrant and in thecapacities indicated.

/s/ GLENN F. TILTON

Glenn F. TiltonChairman of the Board, Presidentand Chief Executive Officer(principal executive officer)

/s/ FREDERIC F. BRACE /s/ WALTER ISAACSON

Frederic F. BraceExecutive Vice President andChief Financial Officer(principal financial and accounting officer)

Walter IsaacsonDirector

/s/ RICHARD J. ALMEIDA /s/ ROBERT D. KREBS

Richard J. Almeida Robert D. KrebsDirector Director

/s/ MARK A. BATHURST /s/ ROBERT S. MILLER, JR.Mark A. Bathurst Robert S. Miller, Jr.Director Director

/s/ MARY K. BUSH /s/ JAMES J. O’CONNOR

Mary K. Bush James J. O’ConnorDirector Director

/s/ STEPHEN R. CANALE /s/ DAVID J. VITALE

Stephen R. Canale David J. VitaleDirector Director

/s/ W. JAMES FARRELL /s/ JOHN H. WALKER

W. James Farrell John H. WalkerDirector Director

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Schedule II

UAL Corporation and Subsidiary CompaniesValuation and Qualifying Accounts

For the Month Ended January 31, 2006,the Eleven Month Period Ended December 31, 2006 and

the Years Ended December 31, 2005 and 2004

(In millions)Description

Balance atBeginningof Period

AdditionsCharged toCosts andExpenses Deductions(a)

Balance atEnd ofPeriod

Year Ended December 31, 2004—Predecessor CompanyReserves deducted from assets to which they apply:

Allowance for doubtful accounts. . . . . . . . . . . . . . $ 26 $ 12 $ 14 $ 24Obsolescence allowance—

Flight equipment spare parts . . . . . . . . . . . . . . . $ 36 $ 22 $ 16 $ 42Valuation allowance for deferred tax assets . . . . $ 2,183 $ 640 $ 4 $ 2,819

Year Ended December 31, 2005—Predecessor CompanyReserves deducted from assets to which they apply:

Allowance for doubtful accounts. . . . . . . . . . . . . . $ 24 $ 8 $ 9 $ 23Obsolescence allowance—

Flight equipment spare parts . . . . . . . . . . . . . . . $ 42 $ 44 $ 20 $ 66Valuation allowance for deferred tax assets . . . . $ 2,819 $7,830 $ 31 $10,618

Period from January 1, 2006 to January 31, 2006—Predecessor CompanyReserves deducted from assets to which they apply:

Allowance for doubtful accounts. . . . . . . . . . . . . . $ 23 $ 6 $ 2 $ 27Obsolescence allowance—

Flight equipment spare parts . . . . . . . . . . . . . . . $ 66 $ — $ 66(b) $ —Valuation allowance for deferred tax assets . . . . $10,618 $ 180 $8,488(b) $ 2,310

Period from February 1, 2006 to December 31, 2006—Successor CompanyReserves deducted from assets to which they apply:

Allowance for doubtful accounts. . . . . . . . . . . . . . $ 27 $ 18 $ 18 $ 27Obsolescence allowance—

Flight equipment spare parts . . . . . . . . . . . . . . . $ — $ 6 $ — $ 6Valuation allowance for deferred tax assets . . . . $ 2,310 $ — $ 62 $ 2,248

(a) Deduction from reserve for purpose for which reserve was created.

(b) Amounts include adjustments as required for the adoption of fresh-start reporting on February 1,2006.

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EXHIBIT INDEX

*3.1 Restated Certificate of Incorporation of UAL Corporation (filed as Exhibit 3.1 to UAL’sForm 8-K filed February 1, 2006, Commission file number 1-6033, and incorporated hereinby reference)

*3.2 Amended and Restated Bylaws of UAL Corporation (filed as Exhibit 3.2 to UAL’sForm 8-K filed February 1, 2006, Commission file number 1-6033, and incorporated hereinby reference)

*4.1 Revolving Credit, Term Loan and Guaranty Agreement dated December 24, 2002 by andamong United Air Lines, Inc., UAL Corporation, certain subsidiaries of United AirLines, Inc. and UAL Corporation as named therein, the Lenders named therein, JP MorganChase Bank, et al. (filed as Exhibit 4.9 to UAL’s Form 10-K for the year endedDecember 31, 2002, Commission file number 1-6033, and incorporated herein by reference)

*4.2 First Amendment dated February 10, 2003 to Revolving Credit, Term Loan and GuarantyAgreement dated December 24, 2002 by and among United Air Lines, Inc., UALCorporation, certain subsidiaries of United Air Lines, Inc. and UAL Corporation as namedtherein, the Lenders named therein, JP Morgan Chase Bank, et al. (filed as Exhibit 4.10 toUAL’s Form 10-K for the year ended December 31, 2002, Commission file number 1-6033,and incorporated herein by reference)

*4.3 Second Amendment dated February 10, 2003 to Revolving Credit, Term Loan and GuarantyAgreement dated December 24, 2002 by and among United Air Lines, Inc., UALCorporation, certain subsidiaries of United Air Lines, Inc. and UAL Corporation as namedtherein, the Lenders named therein, JP Morgan Chase Bank, et al. (filed as Exhibit 4.11 toUAL’s Form 10-K for the year ended December 31, 2002, Commission file number 1-6033,and incorporated herein by reference)

*4.4 Third Amendment dated February 18, 2003 to Revolving Credit, Term Loan and GuarantyAgreement dated December 24, 2002 by and among United Air Lines, Inc., UALCorporation, certain subsidiaries of United Air Lines, Inc. and UAL Corporation as namedtherein, the Lenders named therein, JP Morgan Chase Bank, et al. (filed as Exhibit 4.12 toUAL’s Form 10-K for the year ended December 31, 2002, Commission file number 1-6033,and incorporated herein by reference)

*4.5 Fourth Amendment dated March 27, 2003 to Revolving Credit, Term Loan and GuarantyAgreement dated December 24, 2002 by and among United Air Lines, Inc., UALCorporation, certain subsidiaries of United Air Lines, Inc. and UAL Corporation as namedtherein, the Lenders named therein, JP Morgan Chase Bank, et al. (filed as Exhibit 4.6 toUAL’s Form 10-Q for the quarter ended June 30, 2004, Commission file number 1-6033,and incorporated herein by reference)

*4.6 Fifth Amendment dated May 15, 2003 to Revolving Credit, Term Loan and GuarantyAgreement dated December 24, 2002 by and among United Air Lines, Inc., UALCorporation, certain subsidiaries of United Air Lines, Inc. and UAL Corporation as namedtherein, the Lenders named therein, JP Morgan Chase Bank, et al. (filed as Exhibit 4.7 toUAL’s Form 10-Q for the quarter ended June 30, 2004, Commission file number 1-6033,and incorporated herein by reference)

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*4.7 Sixth Amendment dated October 10, 2003 to Revolving Credit, Term Loan and GuarantyAgreement dated December 24, 2002 by and among United Air Lines, Inc., UALCorporation, certain subsidiaries of United Air Lines, Inc. and UAL Corporation as namedtherein, the Lenders named therein, JP Morgan Chase Bank, et al. (filed as Exhibit 4.8 toUAL’s Form 10-Q for the quarter ended June 30, 2004, Commission file number 1-6033,and incorporated herein by reference)

*4.8 Seventh Amendment dated May 7, 2004 to Revolving Credit, Term Loan and GuarantyAgreement dated December 24, 2002 by and among United Air Lines, Inc., UALCorporation, certain subsidiaries of United Air Lines, Inc. and UAL Corporation as namedtherein, the Lenders named therein, JP Morgan Chase Bank, et al. (filed as Exhibit 4.9 toUAL’s Form 10-Q for the quarter ended June 30, 2004, Commission file number 1-6033, andincorporated herein by reference)

*4.9 Eighth Amendment dated July 22, 2004 to Revolving Credit, Term Loan and GuarantyAgreement dated December 24, 2002 by and among United Air Lines, Inc., UALCorporation, certain subsidiaries of United Air Lines, Inc. and UAL Corporation as namedtherein, the Lenders named therein, JP Morgan Chase Bank, et al. (filed as Exhibit 4.1 toUAL’s Form 8-K filed September 8, 2004, Commission file number 1-6033, andincorporated herein by reference)

*4.10 Ninth Amendment dated November 5, 2004 to Revolving Credit, Term Loan and GuarantyAgreement dated December 24, 2002 by and among United Air Lines, Inc., UALCorporation, certain subsidiaries of United Air Lines, Inc. and UAL Corporation as namedtherein, the Lenders named therein, JP Morgan Chase Bank, et al. (filed as Exhibit 4.23 toUAL’s Form 10-K for the year ended December 31, 2004, Commission file number 1-6033,and incorporated herein by reference)

*4.11 Tenth Amendment dated January 26, 2005 to Revolving Credit, Term Loan and GuarantyAgreement dated December 24, 2002 by and among United Air Lines, Inc., UALCorporation, certain subsidiaries of United Air Lines, Inc. and UAL Corporation as namedtherein, the Lenders named therein, JP Morgan Chase Bank, et al. (filed as Exhibit 4.24 toUAL’s Form 10-K for the year ended December 31, 2004, Commission file number 1-6033,and incorporated herein by reference)

*4.12 Eleventh Amendment dated April 8, 2005 to Revolving Credit, Term Loan and GuarantyAgreement dated December 24, 2002 by and among United Air Lines, Inc., UALCorporation, certain subsidiaries of United Air Lines, Inc. and UAL Corporation as namedtherein, the Lenders named therein, JP Morgan Chase Bank, et al. (filed as Exhibit 10.2 toUAL’s Form 10-Q for the quarter ended June 30. 2005, Commission file number 1-6033, andincorporated herein by reference)

*4.13 Twelfth Amendment dated July 19, 2005, to the Revolving Credit, Term Loan and GuarantyAgreement, dated December 24, 2002, by and among United Air Lines, Inc., UALCorporation, certain subsidiaries of United Air Lines, Inc. and UAL Corporation as namedtherein, the Lenders named therein, JP Morgan Chase Bank, et al. (filed as Exhibit 99.1 toUAL’s Form 8-K filed July 20, 2005, Commission file number 1-6033, and incorporatedherein by reference)

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*4.14 Thirteenth Amendment dated August 11, 2005, to the Revolving Credit, Term Loan andGuaranty Agreement, dated December 24, 2002, by and among United Air Lines, Inc., UALCorporation, certain subsidiaries of United Air Lines, Inc. and UAL Corporation as namedtherein, the Lenders named therein, JP Morgan Chase Bank, et al. (filed as Exhibit 99.1 toUAL’s Form 8-K filed August 30, 2005, Commission file number 1-6033, and incorporatedherein by reference)

*4.15 Revolving Credit, Term Loan and Guaranty Agreement, dated February 1, 2006 , by andamong United Air Lines, Inc., UAL Corporation and certain subsidiaries of United AirLines, Inc. and UAL Corporation as named therein, the Lenders named therein, JP MorganChase Bank, et al. (filed as Exhibit 4.1 to UAL’s Form 8-K filed February 1, 2006,Commission file number 1-6033, and incorporated herein by reference)

4.16 Consent and First Amendment to Revolving Credit, Term Loan and Guaranty Agreementdated August 4, 2006 by and among United Air Lines, Inc., UAL Corporation and certainsubsidiaries of United Air Lines, Inc. and UAL Corporation as named therein, the Lendersnamed therein, JP Morgan Chase Bank, et al.

*4.17 Amended and Restated Revolving Credit, Term Loan and Guaranty Agreement, dated as ofFebruary 2, 2007 by and among United Air Lines, Inc., UAL Corporation, certainsubsidiaries of United Air Lines, Inc. and UAL Corporation, as named therein, the Lendersnamed therein, JPMorgan Chase Bank, et al. (filed as Exhibit 4.1 to UAL’s Form 8-K filedFebruary 5, 2007, Commission file number 1-6033, and incorporated herein by reference)

*4.18 Indenture dated as of February 1, 2006 among UAL Corporation as Issuer, United AirLines, Inc. as Guarantor and the Bank of New York Trust Company, N.A. as Trustee,providing for issuance at 6% Senior Notes due 2031 and 8% Contingent Senior Notes (filedas Exhibit 4.2 to UAL’s Form 8-K filed February 1, 2006, Commission file number 1-6033,and incorporated herein by reference)

*4.19 ORD Indenture dated as of February 1, 2006 among UAL Corporation as Issuer, UnitedAir Lines, Inc. as Guarantor and the Bank of New York Trust Company, N.A. as Trustee,providing for issuance at 5% Senior Convertible notes due 2021 (filed as Exhibit 4.3 toUAL’s Form 8-K filed February 1, 2006, Commission file number 1-6033, and incorporatedherein by reference)

*4.20 First Supplement to Indenture dated February 16, 2006 among UAL Corporation, UnitedAir Lines, Inc. as Guarantor and the Bank of New York Trust Company, N.A. as Trustee(filed as Exhibit 99.1 to UAL’s Form 8-K filed February 21, 2006, Commission file number1-6033, and incorporated herein by reference)

*4.21 Indenture dated as of July 25, 2006 among UAL Corporation as Issuer, United AirLines, Inc. as Guarantor and The Bank of New York Trust Company, N.A., as Trustee,providing for issuance of 4.50% Senior Limited-Subordination Convertible Notes due 2021(filed as Exhibit 4.1 to UAL’s Form 8-K filed July 27, 2006, Commission file number 1-6033,and incorporated herein by reference)

*†10.1 UAL Corporation Success Sharing Program—Performance Incentive Plan dated January 1,2004 (filed as Exhibit 10.41 to UAL’s Form 10-K for the year ended December 31, 2003,Commission file number 1-6033, and incorporated herein by reference)

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*†10.2 Declaration of Amendment to UAL Corporation Success Sharing Program - PerformanceIncentive Plan dated July 15, 2004 (filed as Exhibit 10.1 to UAL’s Form 10-Q for the quarterended September 30, 2004, Commission file number 1-6033, and incorporated herein byreference)

*†10.3 Declaration of Amendment to UAL Corporation Success Sharing Program - PerformanceIncentive Plan dated August 24, 2004. (filed as Exhibit 10.2 to UAL’s Form 10-Q for thequarter ended September 30, 2004, Commission file number 1-6033, and incorporatedherein by reference)

†10.4 UAL Corporation Success Sharing Program—Performance Incentive Plan effectiveJanuary 1, 2007

†10.5 UAL Corporation Success Sharing Program—Profit Sharing Plan effective January 1, 2006

*†10.6 UAL Corporation Employees Performance Incentive Plan (filed as Exhibit 10.2 to UAL’sForm 10-Q for the quarter ended June 30, 2000, Commission file number 1-6033, andincorporated herein by reference)

*†10.7 First Amendment of UAL Corporation Performance Incentive Plan dated February 23, 2006(filed as Exhibit 10.1 to UAL’s Form 8-K filed February 28, 2006, Commission file number1-6033, and incorporated herein by reference)

*†10.8 UAL Corporation Retention and Recognition Bonus Plan (filed as Exhibit 10.2 to UAL’sForm 10-Q for the quarter ended September 30, 2003, Commission file number 1-6033, andincorporated herein by reference)

*†10.9 UAL Corporation Executive Severance Policy (filed as Exhibit 10.3 to UAL’s Form 10-Q forthe quarter ended September 30, 2003, Commission file number 1-6033, and incorporatedherein by reference)

*†10.10 United NewVentures Long Term Incentive Plan (filed as Exhibit 10.44 to UAL’s Form 10-Kfor the year ended December 31, 2001, Commission file number 1-6033, and incorporatedherein by reference)

*†10.11 First Amendment to United NewVentures Long Term Incentive Plan, dated June 24, 2003(filed as Exhibit 10.1 to UAL’s Form 10-Q for the quarter ended June 30, 2003, Commissionfile number 1-6033, and incorporated herein by reference)

*†10.12 Second Amendment of United NewVentures Long Term Incentive Plan, dated February 23,2006 (filed as Exhibit 10.2 to UAL’s Form 8-K dated February 28, 2006, Commission filenumber 1-6033, and incorporated herein by reference)

*†10.13 Employment Agreement dated September 5, 2002 by and among United Air Lines, Inc.,UAL Corporation and Glenn F. Tilton (filed as Exhibit 10.3 to UAL’s Form 10-Q for thequarter ended September 30, 2002, Commission file number 1-6033, and incorporatedherein by reference)

*†10.14 Amendment No. 1 dated December 8, 2002 to the Employment Agreement datedSeptember 5, 2002 by and among United Air Lines, Inc., UAL Corporation and Glenn F.Tilton (filed as Exhibit 10.44 to UAL’s Form 10-K for the year ended December 31, 2002,Commission file number 1-6033, and incorporated herein by reference)

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*†10.15 Amendment No. 2 dated February 17, 2003 to the Employment Agreement datedSeptember 5, 2002 by and among United Air Lines, Inc., UAL Corporation and Glenn F.Tilton (filed as Exhibit 10.45 to UAL’s Form 10-K for the year ended December 31, 2002,Commission file number 1-6033, and incorporated herein by reference)

*†10.16 Amendment No. 3 dated September 29, 2006 to the Employment Agreement datedSeptember 5, 2002, among UAL Corporation, United Air Lines, Inc. and Glenn F. Tilton(filed as Exhibit 99.2 to UAL’s Form 8-K filed on September 29, 2006, Commission filenumber 1-6033, and incorporated herein by reference)

*†10.17 Letter Agreement dated April 4, 2003 between Glenn F. Tilton, UAL Corporation andUnited Air Lines, Inc. (filed as Exhibit 10.50 to UAL’s Form 10-K for the year endedDecember 31, 2003, Commission file number 1-6033, and incorporated herein by reference)

*†10.18 Letter Agreement dated May 13, 2004 between Glenn F. Tilton, UAL Corporation andUnited Air Lines, Inc. (filed as Exhibit 10.1 to UAL’s Form 10-Q for the quarter endedSeptember 30, 2004, Commission file number 1-6033, and incorporated herein by reference)

*†10.19 Letter Agreement dated July 29, 2004 between Glenn F. Tilton, UAL Corporation andUnited Air Lines, Inc. (filed as Exhibit 10.2 to UAL’s Form 10-Q for the quarter endedSeptember 30, 2004, Commission file number 1-6033, and incorporated herein by reference)

*†10.20 Letter Agreement dated March 11, 2005 between Glenn F. Tilton, UAL Corporation andUnited Air Lines, Inc. (filed as Exhibit 10.43 to UAL’s Form 10-K for the year endedDecember 31, 2004, Commission file number 1-6033, and incorporated herein by reference)

*†10.21 Glenn F. Tilton Secular Trust Agreement No. 1 dated September 5, 2002 by and amongUAL Corporation, Glenn F. Tilton and the Northern Trust Company (filed as Exhibit C toExhibit 10.3 to UAL’s Form 10-Q for the quarter ended September 30, 2002, Commissionfile number 1-6033, and incorporated herein by reference)

*†10.22 Amendment No. 1 dated February 17, 2003 to the Glenn F. Tilton Secular Trust AgreementNo. 1 dated September 5, 2002 by and among UAL Corporation, Glenn F. Tilton and TheNorthern Trust Company (filed as Exhibit 10.47 to UAL’s Form 10-K for the year endedDecember 31, 2002, Commission file number 1-6033, and incorporated herein by reference)

*†10.23 Amendment No. 2 dated February 28, 2003 to the Glenn F. Tilton Secular Trust AgreementNo. 1 dated September 5, 2002 by and among UAL Corporation, Glenn F. Tilton and TheNorthern Trust Company (filed as Exhibit 10.48 to UAL’s Form 10-K for the year endedDecember 31, 2002, Commission file number 1-6033, and incorporated herein by reference)

*†10.24 Amendment No. 3 dated December 31, 2003 to the Glenn F. Tilton Secular TrustAgreement No. 1 dated September 5, 2002 by and among UAL Corporation, Glenn F.Tilton and The Northern Trust Company (filed as Exhibit 10.54 to UAL’s Form 10-K for theyear ended December 31, 2003, Commission file number 1-6033, and incorporated herein byreference)

*†10.25 Glenn F. Tilton Secular Trust Agreement No. 2 dated September 5, 2002 by and amongUAL Corporation, Glenn F. Tilton and the Northern Trust Company (filed as Exhibit D toExhibit 10.3 to UAL’s Form 10-Q for the quarter ended September 30, 2002, Commissionfile number 1-6033, and incorporated herein by reference)

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*†10.26 Amendment No. 1 dated February 17, 2003 to the Glenn F. Tilton Secular Trust AgreementNo. 2 dated September 5, 2002 by and among UAL Corporation, Glenn F. Tilton and TheNorthern Trust Company (filed as Exhibit 10.50 to UAL’s Form 10-K for the year endedDecember 31, 2002, Commission file number 1-6033, and incorporated herein by reference)

*†10.27 Amendment No. 2 dated February 28, 2003 to the Glenn F. Tilton Secular Trust AgreementNo. 2 dated September 5, 2002 by and among UAL Corporation, Glenn F. Tilton and TheNorthern Trust Company (filed as Exhibit 10.51 to UAL’s Form 10-K for the year endedDecember 31, 2002, Commission file number 1-6033, and incorporated herein by reference)

*†10.28 Amendment No. 3 dated December 31, 2003 to the Glenn F. Tilton Secular TrustAgreement No. 2 dated September 5, 2002 by and among UAL Corporation, Glenn F.Tilton and The Northern Trust Company (filed as Exhibit 10.58 to UAL’s Form 10-K for theyear ended December 31, 2003, Commission file number 1-6033, and incorporated herein byreference)

*†10.29 Glenn F. Tilton Secular Trust Agreement No. 3 dated September 5, 2002 by and amongUAL Corporation, Glenn F. Tilton and the Northern Trust Company (filed as Exhibit E toExhibit 10.3 to UAL’s Form 10-Q for the quarter ended September 30, 2002, Commissionfile number 1-6033, and incorporated herein by reference)

*†10.30 Amendment No. 1 dated February 17, 2003 to the Glenn F. Tilton Secular Trust AgreementNo. 3 dated September 5, 2002 by and among UAL Corporation, Glenn F. Tilton and TheNorthern Trust Company (filed as Exhibit 10.53 to UAL’s Form 10-K for the year endedDecember 31, 2002¸ Commission file number 1-6033, and incorporated herein by reference)

*†10.31 Amendment No. 2 dated February 28, 2003 to the Glenn F. Tilton Secular Trust AgreementNo. 3 dated September 5, 2002 by and among UAL Corporation, Glenn F. Tilton and TheNorthern Trust Company (filed as Exhibit 10.54 to UAL’s Form 10-K for the year endedDecember 31, 2002, Commission file number 1-6033, and incorporated herein by reference)

*†10.32 Amendment No. 3 dated December 31, 2003 to the Glenn F. Tilton Secular TrustAgreement No. 3 dated September 5, 2002 by and among UAL Corporation, Glenn F.Tilton and The Northern Trust Company (filed as Exhibit 10.62 to UAL’s Form 10-K for theyear ended December 31, 2003, Commission file number 1-6033, and incorporated herein byreference)

*†10.33 Restricted Stock Agreement dated September 2, 2002 between Glenn F. Tilton and UALCorporation (filed as Exhibit B to Exhibit 10.3 to UAL’s Form 10-Q for the quarter endedSeptember 30, 2002, Commission file number 1-6033, and incorporated herein by reference)

*†10.34 Agreement between UAL Corporation, United Air Lines, Inc. and Douglas A. Hacker (filedas Exhibit 10.1 to UAL’s Form 10-Q for the quarter ended September 30, 2001, Commissionfile number 1-6033, and incorporated herein by reference)

*†10.35 Letter Agreement dated May 1, 2006 between UAL Corporation, United Air Lines, Inc. andDouglas A. Hacker (filed as Exhibit 10.1 to UAL’s Form 8-K filed April 11, 2006,Commission file number 1-6033, and incorporated herein by reference)

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*†10.36 Addendum to Restricted Stock Agreement dated October 24, 2002 between UALCorporation and Peter D. McDonald (filed as Exhibit 10.65 to UAL’s Form 10-K for theyear ended December 31, 2003, Commission file number 1-6033, and incorporated herein byreference)

*†10.37 Addendum to Non-qualified Stock Option Agreement dated February 27, 2002 betweenUAL Corporation and Peter D. McDonald (filed as Exhibit 10.67 to UAL’s Form 10-K forthe year ended December 31, 2003, Commission file number 1-6033, and incorporatedherein by reference)

*†10.38 Employment Agreement dated September 29, 2006, among UAL Corporation, United AirLines, Inc. and Peter D. McDonald (as filed as Exhibit 99.3 to UAL’s Form 8-K filed onSeptember 29, 2006, Commission file number 1-6033, and incorporated herein by reference)

*†10.39 Addendum to Non-qualified Stock Option Agreement dated March 1, 2002 between UALCorporation and Frederic F. Brace (filed as Exhibit 10.66 to UAL’s Form 10-K for the yearended December 31, 2003, Commission file number 1-6033, and incorporated herein byreference)

†10.40 Description of Officer Benefits

*†10.41 UAL Corporation 2006 Management Equity Incentive Plan (filed as Exhibit 10.1 to UAL’sForm 8-K filed February 1, 2006, Commission file number 1-6033, and incorporated hereinby reference)

†10.42 Description of Benefits for Directors

*†10.43 UAL Corporation 1995 Directors Plan (filed as Exhibit 10.37 to UAL’s Form 10-K for theyear ended December 31, 2003, Commission file number 1-6033, and incorporated herein byreference)

*†10.44 Amendment and Termination of the 1995 UAL Corporation Directors Plan dated as ofOctober 27, 2005 (as filed as Exhibit 10.1 to UAL’s Form 8-K dated October 28, 2005,Commission file number 1-6033, and incorporated herein as reference)

*†10.45 UAL Corporation 2006 Directors Equity Incentive Plan (filed as Exhibit 99.2 to UAL’sForm 8-K dated January 11, 2006, Commission file number 1-6033, and incorporated hereinby reference)

*†10.46 Letter Agreement dated April 28, 1994 between UAL Corporation and Paul E. Tierney(filed as Exhibit 10.43 to UAL’s Form 10-K for the year ended December 31, 2005,Commission file number 1-6033, and incorporated herein as reference)

*†10.47 Letter Agreement dated April 28, 1994 between UAL Corporation and James J. O’Connor(filed as Exhibit 10.44 to UAL’s Form 10-K for year ended December 31, 2005, Commissionfile number 1-6033, and incorporated herein by reference)

†10.48 Amendment No. 1 dated March 12, 2007 to the Peter D. McDonald Secular TrustAgreement dated September 29, 2006

12 Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed Chargesand Preferred Stock Dividend Requirements

21 List of UAL’s subsidiaries

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23 Consent of Independent Registered Public Accounting Firm

31.1 Certification of the Principal Executive Officer Pursuant to 15 U.S.C. 78m(a) or 78o(d)Section 302 of the Sarbanes-Oxley Act of 2002)

31.2 Certification of the Principal Financial Officer Pursuant to 15 U.S.C. 78m(a) or 78o(d)Section 302 of the Sarbanes-Oxley Act of 2002)

32.1 Certification of the Chief Executive Officer Pursuant to 18 U.S.C. 1350 (Section 906 of theSarbanes-Oxley Act of 2002)

32.2 Certification of the Chief Financial Officer Pursuant to 18 U.S.C. 1350 (Section 906 of theSarbanes-Oxley Act of 2002)

* Previously Filed

† Indicates Management contract or compensatory plan or arrangement

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Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-132111, 333-132110,and 333-131434 on Form S-8 of our reports dated March 16, 2007, relating to the consolidated financialstatements and financial statement schedule of UAL Corporation (which report expresses an unqualifiedopinion and includes explanatory paragraphs relating to Company’s emergence from bankruptcy, andchanges in accounting for share based payments, and the method of accounting for and the disclosuresregarding pensions and postretirement benefits) and our report on internal control over financial reportingdated March 16, 2007 (which report expresses an adverse opinion on the effectiveness of the Company’sinternal control over financial reporting because of the material weakness), appearing in this AnnualReport on Form 10-K of UAL Corporation for the year ended December 31, 2006.

/s/ Deloitte & Touche LLPChicago, IllinoisMarch 16, 2007

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Exhibit 31.1

Certification of the Principal Executive OfficerPursuant to 15 U.S.C. 78m(a) or 78o(d)

(Section 302 of the Sarbanes-Oxley Act of 2002)

I, Glenn F. Tilton, certify that:

(1) I have reviewed this annual report on Form 10-K for the period ended December 31, 2006 of UALCorporation (the “Company”);

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omitto state a material fact necessary to make the statements made, in light of the circumstances underwhich such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in thisreport, fairly present in all material respects the financial condition, results of operations and cashflows of the Company as of, and for, the periods presented in this report;

(4) The Company’s other certifying officer and I are responsible for establishing and maintainingdisclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) andinternal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls andprocedures to be designed under our supervision, to ensure that material information relating tothe Company, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control overfinancial reporting to be designed under our supervision, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presentedin this report our conclusions about the effectiveness of the disclosure controls and procedures, asof the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company’s internal control over financial reportingthat occurred during the Company’s most recent fiscal quarter that has materially affected, or isreasonably likely to materially affect, the Company’s internal control over financial reporting; and

(5) The Company’s other certifying officer and I have disclosed, based on our most recent evaluation ofinternal control over financial reporting, to the Company’s auditors and the audit committee ofCompany’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal controlover financial reporting which are reasonably likely to adversely affect the Company’s ability torecord, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have asignificant role in the Company’s internal control over financial reporting.

/s/ Glenn F. Tilton

Glenn F. TiltonUAL CorporationChairman, President and Chief Executive OfficerMarch 16, 2007

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Exhibit 31.2

Certification of the Principal Financial OfficerPursuant to 15 U.S.C. 78m(a) or 78o(d)

(Section 302 of the Sarbanes-Oxley Act of 2002)

I, Frederic F. Brace, certify that:

(1) I have reviewed this annual report on Form 10-K for the period ended December 31, 2006 of UALCorporation (the “Company”);

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omitto state a material fact necessary to make the statements made, in light of the circumstances underwhich such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in thisreport, fairly present in all material respects the financial condition, results of operations and cashflows of the Company as of, and for, the periods presented in this report;

(4) The Company’s other certifying officer and I are responsible for establishing and maintainingdisclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) andinternal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls andprocedures to be designed under our supervision, to ensure that material information relating tothe Company, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control overfinancial reporting to be designed under our supervision, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presentedin this report our conclusions about the effectiveness of the disclosure controls and procedures, asof the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company’s internal control over financial reportingthat occurred during the Company’s most recent fiscal quarter that has materially affected, or isreasonably likely to materially affect, the Company’s internal control over financial reporting; and

(5) The Company’s other certifying officer and I have disclosed, based on our most recent evaluation ofinternal control over financial reporting, to the Company’s auditors and the audit committee ofCompany’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal controlover financial reporting which are reasonably likely to adversely affect the Company’s ability torecord, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have asignificant role in the Company’s internal control over financial reporting.

/s/ Frederic F. Brace

Frederic F. BraceUAL CorporationExecutive Vice President and Chief Financial OfficerMarch 16, 2007

Page 147: ual Annual Report  2006

Exhibit 32.1

Certification of the Chief Executive OfficerPursuant to 18 U.S.C. 1350

(Section 906 of the Sarbanes-Oxley Act of 2002)

I, Glenn F. Tilton, certify that to the best of my knowledge, based upon a review of the annual reporton Form 10-K for the period ended December 31, 2006 of UAL Corporation (the “Report”):

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the SecuritiesExchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financialcondition and results of operations of UAL Corporation.

/s/ Glenn F. TiltonGlenn F. TiltonUAL CorporationChairman, President and Chief Executive OfficerMarch 16, 2007

Page 148: ual Annual Report  2006

Exhibit 32.2

Certification of the Chief Financial OfficerPursuant to 18 U.S.C. 1350

(Section 906 of the Sarbanes-Oxley Act of 2002)

I, Frederic F. Brace, certify that to the best of my knowledge, based upon a review of the annualreport on Form 10-K for the period ended December 31, 2006 of UAL Corporation (the “Report”):

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the SecuritiesExchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financialcondition and results of operations of UAL Corporation.

/s/ Frederic F. Brace

Frederic F. BraceUAL CorporationExecutive Vice President and Chief Financial OfficerMarch 16, 2007